Ernst & Young's economic forecasting club, ITEM, has forecast good news for 2000, but warns that the headlines mask tightening profit margins which could affect investment and jobs 18 months down the line.
The Big Five firm expects a healthy 3.5% economic growth for 2000, underlying inflation below target at just over 2% and interest rates peaking at 6.5%, but E&Y’s ITEM economic advisor Peter Spence has warned that the UK could pay dearly for the positive figures.
He predicts the growth will be balanced by a poor recovery in profits and companies will find it hard to pass on higher operational costs caused by wage and commodity increases because of an incractable public who are standing firm on prices.
Added to this will be pressure from the strength of the pound, which is not set to decline and this will mean that UK businesses will be increasingly uncompetitive in the world market.
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