The European Commission (EC) has upgraded its forecast for the growth of the UK economy this year to 2.7 per cent, up from 2.5 per cent only three months ago, saying that it is “broadening” and should become “firmly established”.
The Commission also upgraded its forecast for 2015, to 2.5 per cent from a previous estimate of 2.4 per cent, meaning that it believes the UK will become one of the fastest-growing economies in Europe.
In addition, it predicts that unemployment will continue to fall from 6.9 per cent to 6.3 per cent by 2015, while an increase in confidence among firms will boost investment.
However, while a strong rise in business investment this year should steer the UK towards a more balanced recovery, the forecast highlights that economic growth is still too reliant on consumer spending.
According to the EC, the UK’s saving ratio will remain at 5.1 per cent this year, a downward revision from a forecast of 6.1 per cent, while the current account deficit will be 3.8 per cent of gross domestic product, making It the widest deficit in Europe over the next two years.
Meanwhile, the International Monetary Fund (IMF) believes that the UK is on course to be the fastest-growing country in the G7 this year, ahead of America, Germany and Japan.
The EC’s forecast came as a survey by the Institute of Chartered Accountants in England and Wales (ICAEW) showed that UK business confidence for the second quarter hit a record high, with those polled expecting almost half a million new private sector jobs to be created in the next 12 months.