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ITEM Club: GDP & business investment growth to slow

Posted at October 20, 2014 | Categories : News

UK GDP growth will slow in 2015, according to EY’s ITEM Club, with business investment growth also expected to fall in the light of political uncertainty in the UK and abroad.

However, falling commodity prices provide a silver lining that will support activity in the UK’s major export markets and keep inflation very low.

The respected economic forecaster reckons business investment will grow by 9% this year, before declining to 5.8% 2015. And with the consumer also pausing for breath, GDP growth is predicted to slow to 2.4% in 2015, down from the 3.1% expected in 2014.

The stalling European recovery and the devaluation of the euro at the expense of the UK pound will add to the problems faced by UK exporters.

Peter Spencer, chief economic advisor to the EY ITEM Club, comments: “Let’s be clear, the forecast for GDP growth is still relatively good. What has changed is the global risks surrounding the forecast and the headwinds facing investment by firms. Looming political uncertainty risks denting corporate confidence, the question now is how will these risks play out?

“I expect caution to become the order of the day. Mortgage lenders and borrowers have already shown greater restraint following the Mortgage Market Review and the prospective increase in interest rates. Given the weakness of commodity prices and wages I doubt that the MPC will be in any hurry to raise interest rates.”