The ITEM club predicted GDP growth of 2.2% for this year, slowing slightly to 2% in 2002 before speeding up again to 2.9% the following year.
It said the nation’s economic strength is due largely to UK consumer spending, which has been surprisingly resilient, providing a bulwark against technical recession.
Professor Peter Spencer, Ernst & Young’s ITEM Club economic advisor, said:’From a European and [American] perspective, the UK consumer is starting to look like the proverbial cat with nine lives – despite worries about the international situation and job prospects.’
According to the study, consumer confidence was strong due to sound economic fundamentals, such as low inflation, interest rates at their lowest point since 1955 and a firm housing market.
The influential club believes strong economy and pound, which has hit the manufacturing and services sectors, make a referendum on joining the euro unlikely in this parliament.
Although company profitability continues to fall, ITEM said businesses were cutting costs by outsourcing, moving production abroad, and improving in-house productivity. It said these measures would reduce earnings and employment and cause personal incomes and consumption to slow in the UK.
But business leaders are not as confident as ITEM, according to a recent survey by mid-tier firm Grant Thornton. It found only one in ten business leaders believe the economy will grow over the next year.
The survey, which was conducted on 2,400 business owners and managers, found one in three respondents were downbeat about the economy. But the majority said their own businesses would grow and 92% of respondents said they would maintain or increase staff numbers.
Graeme Forbes, head of entrepreneurial services at Grant Thornton, said: ‘Faced with high levels of uncertainty, business leaders are having to make increasingly tough decisions about managing their businesses during a downturn, but we also know that some see the situation as creating opportunities to expand their business.’
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