Britain Tipped For Best Economic Growth In 2014

Britain will enjoy the best economic growth of any advanced industrial nation this year, according to a new report by the International Monetary Fund (IMF).

Its latest World Economic Outlook has tipped the UK to see gross domestic product rising by 3.2 per cent this year, although it will slow to 2.7 per cent in 2015 as interest rates start to rise.

These predictions suggest there will be plenty of good news for SMEs, who can enjoy the benefits of more trade and increased consumer spending, both through higher employment and an eventual feeding through of growth into higher wages - something Bank of England governor Mark Carney has said he expects to happen from the middle of 2015 onwards.

According to the IMF, the UK recovery has "become more balanced" between consumption and investment, suggesting it is increasingly sustainable.

One cloud on the horizon is that those who export may find restrictions in the growth of this activity, due to the economic recovery being slower elsewhere. The IMF has trimmed its global economic growth forecast for 2014 from 3.4 per cent to 3.3 per cent, with next year's outlook down from four per cent to 3.8 per cent.

Europe - a key UK export market - was pinpointed as a problem area, with a "multispeed recovery" and slower growth in major eurozone nations like Germany, France and Italy. 

Firms that export to the US had better news, as its growth forecast was upgraded by 0.5 per cent to 2.2 per cent, with "temporary" factors such as extreme cold weather in the early months of the year causing a stalling of the economy.

The economic outlook was not the only IMF publication out this week that has implications for SMEs.

Its Global Financial Stability Report warned that very low interest rates have had the side-effect of encouraging investment in speculative ventures and risky assets, which have a higher danger of failing to provide good yields.

Warning this could cause a fresh crisis, the body has advocated raising interest rates - something that may encourage more lending by banks who can get better returns from SMEs, but may also mean the levels of repayments faced by businesses would be higher.

Expert Opinion

This is yet another good news story for SMEs and the business community in the UK as a whole, with the economy looking to be in a strong position which can only go on to benefit companies of all sizes. <br/> <br/>"Small businesses will be very heartened by this research and will be keen to consider how they can take advantage of the positive environment emerging around them to further develop their operations. <br/> <br/>"Of course, much care has to be taken when it comes properly planning and preparing for the future. SMEs in particular would be wise to talk internally and also to third parties regarding the best approach to expanding operations. <br/> <br/>"This is an important area and critical to getting this right is dialogue with legal experts, who will be able to review plans, ensure compliance with key regulation and also provide insight into the best ways to move a company forward." Fergal Dowling - Partner