The British Chambers of Commerce has increased its 2014 GDP to 3.2% from 3.1%, the highest growth rate since 2007. It has also upped its forecast for 2015 to 2.8% from 2.7% and left 2016 unchanged at 2016.
The increase reflects stronger employment figures and higher than expected growth in Q3 and Q4 2014 than previously forecast in May.
The business group, which represents thousands of companies across the UK, is forecasting a moderate slowdown in growth from 2015 reflecting a deceleration in household consumption and falling public spending as a share of GDP.
BCC Director General John Longworth says we must do everything possible to ensure the strong growth in 2014 is not a flash in the pan. He calls the expected slowdown in 2015 and 2016 a warning sign for the UK which is currently too reliant on consumer spending as a growth driver. He added “We must make sure the stellar growth in 2014 is not a flash in the pan.”
The BCC is forecasting GDP growth of 0.8% in Q3 2014 but has reduced its estimate of exports of goods and services to 0.8% for 2014 from 1.9% and to 4.1% from 4.2% in 2015.
The group is still forecasting the first rise in UK interest rates in Q1 2015 to 0.75% with interest rates reaching 2.25% by Q4 2016. It also expects the unemployment rate to continue to fall to 5.5% in Q2 2015, 5% in Q2 2016 and to 4.9% in Q2 2017.