According to the British Chambers of Commerce (BCC), UK growth will strengthen this year.
Strong consumer spending and the performance of the dominant service sector have made British businesses increasingly confident about their prospects over the next two years.
The BCC upgraded its UK growth forecast for 2015 to 2.7 per cent from a previous projection of 2.6 per cent, and up to 2.6 per cent in 2016 from 2.4 per cent.
Household consumption is expected to be the main driver of growth, as low inflation spurs a rise in consumer confidence. Prices are expected to rise by just 0.3 per cent this year, before increasing to an average of 0.7 per cent in 2016.
The British Retail Consortium said retail spending was 1.7 percent higher last month than in February last year, speeding up a touch from a 1.6 percent rise in January.
John Longworth, the director general of the BCC, said:
“We are upgrading our UK growth forecasts for 2015 and 2016 because businesses up and down the country are doing well despite international and domestic uncertainty.”
A Treasury spokesman responded:
“The BCC are right to say the job is not yet done, so we must keep working through the plan that is delivering economic security in an uncertain world economy.”
However, the BCC has cautioned on uncertainties facing UK businesses, having more than halved its estimate of business investment growth to 3.5 per cent this year. These uncertainties include tensions in Ukraine and the Middle East and “the most wide open UK general election in decades” as well as the stagnating eurozone.
John Longsworth said:
“While 2015 has got off to a good start, there is no room for complacency. The UK is still a long way from achieving the great, sustainable, long-term growth we want to see.
Consumer spending is one of the key drivers in our growth upgrade.
While there’s nothing wrong with consumer confidence, a balanced economy that will provide growth and jobs in the long-term needs a much bigger contribution from business investment and exports.”