UK economy to outperform G7 over 2014

<p>The UK’s economy is set to grow faster than any other country in the G7 over the rest of the year.</p>

The UK economy is set to outperform its G7 counterparts over the rest of 2014, according to new report.

Figures released by the EY Item Club noted that the UK economy will grow faster during the coming year than any other economy in the world's seven largest financial powers. The organisation updated its forecast for growth in the UK from 2.9 per cent to 3.1 per cent, thanks to a 12.5 per cent increase in business investment. This was much higher than GDP growth in the likes of Canada (two per cent) and Germany (1.8 per cent).

The UK has been gradually recovering since the financial crash of 2008 and was aided by a 0.8 per cent GDP rise in the first three months of the year, according to data from the Office for National Statistics (ONS). The figures, released in May, showed positive signs for the country's economy but it was offset by statistics highlighting a £1.9 billion year-on-year increase in borrowing from the government.

Members of the EY Item Club noted that low wage rises will ensure that interest rates remain unchanged until 2015 and there was also more encouraging news about employment opportunities. The report forecast the unemployment rate to drop from the current rate of 6.5 per cent to 5.6 per cent by the end of next year.

Peter Spencer, chief economic adviser to the Item Club, said: "Business investment is being ramped up, generating over half of the growth over the last year and helping to rebalance the economy away from consumption.

"Underpinned by a strong labour market that provides the best of both worlds – boosting incomes via employment rather than wages, while keeping inflation low – the UK economy has hit the sweet spot."

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (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.