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."
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