Low inflation boosts UK economic growth

<p>An EY Item Club report predicts a 2.8 per cent increase in the UK’s economy.</p>

The UK's economy is set to enjoy growth over the coming year, according to a new report.

EY Item Club noted that the economy will expand by 2.8 per cent towards the close of the year. It highlighted low inflation and stronger eurozone growth as being two key factors behind this positive performance. The former has complimented the benefits of higher employment and low oil prices which have both provided stimulus for the UK economy.

It is not all plain sailing, however, as the Item Club warned of potential changes due to the ongoing problem in Greece. The future of the country's debt is still in limbo following the anti-austerity party Syriza being voted in during the last general election. There was quiet confidence that the financial markets were prepared for any further issues.

Going forward, the Item Club forecasts a three per cent growth for 2016, up from the previous estimate of 2.9 per cent. There could be yet more upheaval as Britons go to the polls on May 7th to vote for the next government.

Paul Spencer, chief economic adviser at Item Club, said: "The economy is taking the general election in its stride as 'noflation' trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.

"This is a mirror image of what we saw in 2010/12, when unemployment and inflation were high and Europe was in the doldrums."

Dead heat in the polls

The election has been ramping up in recent weeks as the polling day edges ever closer. The latest BBC Poll of Polls, taken on April 19th, showed the Conservatives and Labour to be neck-and-neck with 34 per cent each, while UKIP sat in third with 12 per cent.

It has fuelled the notion of another hung parliament going on for the next five years.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.