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UK economy "will return to growth" in H2


The UK economy is set to grow in the second half of the year thanks to “a revival on the high street”, according to research released today.

According to financial specialists Ernst & Young’s Item Club, Britain will return to growth in the months to come as consumer spending power increases and disappointing exports boost the high street.

Disposable incomes are predicted to rise by one per cent this year and 1.4 per cent in 2013, “which feeds through to consumer spending growth of 0.6 per cent and 0.8 per cent respectively”, said the Club.

However, the Club’s autumn forecast emphasised that GDP will “stutter” to 0.2 per cent overall in 2012 before increasing to 1.2 per cent next year and 2.4 per cent in 2014, as the trend continues to gather pace before being supported by a housing market resurgence which will arise from easing credit conditions in 2013.

Peter Spencer, Chief Economic Advisor to the Ernst & Young Item Club, explained the findings.

He said: “With exports being battered by the Eurozone crisis and a weakening economic outlook in markets such as the US, India and China, the UK is relying heavily on the high street to come to the rescue this year.

“The fundamentals are in place to enable this to happen. Inflation is coming back to heel, private sector employment is holding up, and the housing market also looks poised for a revival. But it’s not the balanced, long term sustainable growth we were hoping for.”

While net trade is expected to positively contribute to growth next year, the financial specialists anticipate that it will subtract 0.6 per cent from GDP this year and add that any economic improvements are not enough to enable the Government to meet the Office for Budget Responsibility’sdeficit forecast for 2012/13.

“There are though plenty of ‘ifs’ and ‘buts’”, Spencer explained.

“The big question is the extent to which consumers will choose to grasp the opportunity or continue to deleverage and to pay down their debts.”

Published on Monday 15 October by Editorial Assistant

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