Economic growth in 2014 is set to reach a new seven-year high – despite the fact that the British Chambers of Commerce (BCC) has downgraded its UK GDP growth forecast for 2014 from 3.2% to 3.0%.
The new forecast still represents the fastest growth experienced by the British economy since 2007. However, the BCC has also revised down its growth forecasts for 2015 (from 2.8% to 2.6%) and 2016 (from 2.5% to 2.4%). It says this is largely due to slower than expected growth in services, household consumption and exports.
It means that quarterly GDP growth is expected to remain at 0.7% in Q4 2014, followed by a slowdown to 0.6% per quarter from Q1 2015 onwards.
John Longworth, BCC director general, said the downgraded forecast is an “ominous warning sign” and he is urging the government to waste no time in addressing key areas, such as access to capital.
He said: “Although this updated forecast slightly lowers our growth predictions, it also confirms that Britain will be one of the fastest-growing developed economies as we close out 2014. This is a great achievement. However, there is no reason why a 3% growth rate should be the height of our ambitions. Downgrades to our growth forecast are a warning sign that we still face a number of hurdles to securing a balanced and sustainable recovery.”
The BCC predicts that UK interest rates will rise to 0.75% in Q3 2015, two quarters later than in the Q3 forecast. Longworth said: “Our dependence on consumer spending and mortgages means that the UK economy is particularly sensitive to interest rates. Any short-term rate rises could present a huge risk to our economy.”
Also this week, new research has identified the UK and Germany as having the largest number of fast growing companies in Europe. A survey by Von Essen found that 22,615 UK firms have grown their headcount by more than 10% in the last year. Germany topped the table with 32,352 high growth companies.
The UK has the highest proportion of its workforce employed by high growth companies of any major European economy — 8.1% compared to 6.3% in Germany.