Britain’s economic recovery is gaining traction as business investment helps growth broaden, EY’s Item Club will say in its latest forecast, to be published today.
British GDP will increase 3.1% in 2014, the London-based accounting firm will say, revising up a forecast of 2.9% published in April. That puts Britain on track to be the fastest growing economy among the Group of Seven nations this year with the balance of growth shifting to business investment from consumer spending.
“The UK has hit the sweet spot,” Peter Spencer, chief economic adviser to the EY Item Club said. “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.”
GDP expanded by 0.8% in the second quarter, matching the first quarter’s growth, according to the median estimate of 36 economists in a Bloomberg survey. On an annual basis, the economy grew by 3.1%, a separate poll predicted.
Capital spending by firms will increase 12.5% this year.
“Stronger corporate confidence in future demand is driving fixed investment,” said Mark Gregory, chief economist at EY. “After several false starts, this time it could be different.”