Forecast for UK growth in 2011 raised to 2.7pc
Published 19/04/2010 | 05:00
ERNST & Young's ITEM Club raised its forecast for UK economic growth next year, predicting that the weakness of the pound will fuel exports.
The ITEM Club is one of the most influential economic forecasting groups in the UK, as it uses the same model as the UK Treasury. However, sterling weakness, compared with the euro, has a negative effect on Irish exports to Great Britain.
Gross domestic product will rise 2.7pc next year, up from an estimate in January for 2.5pc.
But the economy "will struggle" to expand 1pc this year, the same amount predicted earlier.
The pound has dropped about 25pc on a trade-weighted basis since the start of 2007, and UK businesses should take advantage of that, the group urge.
Prime Minister Gordon Brown is trying to narrow the opposition Conservatives' lead in voter opinion polls ahead of the May 6 election, by claiming his decisions will prevent a return to recession.
But researchers believe that the UK is an economy of two halves.
"While households are weighed down by debt and under pressure in the labour market, UK Plc could provide a welcome fillip to the economy if corporate treasurers were to release some of the cash they have been holding on to during the recession," they said. (© Bloomberg)