10th March 2014
The UK economy is set to surpass its pre-financial crisis peak by the summer according to forecasts from a major business lobby group writes Philip Scott.
The British Chambers of Commerce (BCC) has today upgraded its economic growth forecasts for the next two years – from 2.7% to 2.8% in 2014 and from 2.4% to 2.5% in 2015.
It also expects the economic expansion to hold at 2.5% in 2016.
In its 2014 Economic Forecast, the organisation conveyed increasing business optimism and says its expects GDP growth to exceed its pre-recession level sometime between April and the end of June, three months earlier than it predicted in December 2013.
John Longworth, BCC director general, says that the economy is ‘gaining momentum’ and cites businesses across the UK which have fought hard to grow and create jobs, as the primary reason behind the better backdrop. However, he also warns that the economy still faces long-term challenges despite recent progress.
While it expects the overall unemployment rate to fall from 7.2% in the last three months of 2013 to 6% by the same period in 2016, it anticipates that youth unemployment (16-24 year-olds) will remain almost three times the national average between 2014 and 2016, dropping only from 19.9% to 17.8% over the same period.
The main contributors to UK GDP growth in the next three years will be household consumption and output from services says the report.
It expects that after reaching 2.4% in 2013, growth in household consumption will continue at 2.4% in 2014, and will edge up to 2.5% in 2015 and 2016 while service sector output is forecast to record growth of 2.9% in 2014, 2.7% in 2015, and 2.7% in 2016.
But Longworth asserts that is not yet the time to break out the champagne. He says: “Major issues remain, such as the unacceptably high level of youth unemployment. We urge the Chancellor to use this month’s Budget wisely by incentivising businesses to hire young people so that the next generation of workers are not left behind.
“Crucially, Britain is simply not investing enough. While business investment is expected to grow, it will remain way below pre-crisis levels for some time. There is also more to do in securing access to finance for growing firms – as this too will be crucial to securing our economic future. So is getting public and private sector funding together to address the crippling gaps in our transport, digital and energy infrastructure.”