The EY Item Club Predicts Slower Economic Growth During 2015

During 2014, the UK's economy is expected to grow by 3.1 per cent, but next year, the forecast is significantly lower at just 2.4 per cent, according to new analysis.

The Ernst & Young (EY) Item Club has published its Autumn Forecast report, which takes a variety of factors into account before looking at how these will affect the country's financial situation and business performance in the near future.

EY has partly put this slow growth down to frozen interest rates, which are set to remain on hold until next spring.

However, political uncertainty due to the upcoming general election in the UK and other global goings-on, such as the current conflict in Ukraine, have also played a part in the EY Item Club's economic predictions.

Chief economic adviser at the organisation Peter Spencer commented: "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 ... I expect caution to become the order of the day."

Despite these concerns from the EY Item Club, the Bank of England predicts that economic growth in Britain next year will be slightly higher at three per cent, although this is still lower than the forecast for 2014.

In addition, the International Monetary Fund thinks growth will be 3.2 per cent this year, followed by 2.7 the next, with the Confederation of British Industry predicting an increase of three per cent for 2014 and 2.7 for 2015. This means the EY Item Club's forecast is the lowest of them all.

Mr Spencer gave another reason for this, stating: "The UK's export outlook continues to look dreadful. The glimpse of economic rebalancing that we saw in the early part of this year has turned out to be a false dawn."

He added that business confidence has been somewhat damaged by current political situations, which may influence their spending over the next 12 months, therefore having a knock-on effect on the country's economy.

Expert Opinion

The consensus is that there will be solid growth during 2015, however there are now concerns that the economic picture for the future has become less certain. <br/> <br/>“There are clearly a number of variables that are difficult to control, but in the meantime it is vital that the Government supports the UK’s SMEs and ensures that the environment is favourable for them to continue growing. <br/> <br/>“These businesses are the ‘engine room’ of the UK economy and without them, we wouldn’t have seen the growth that we have seen recently. The UK has built up a strong reputation for entrepreneurship and it is vital that this continues.” <br/> Steven Beahan - Partner