ITEM Club flags 2015 slowdown

EY’S ITEM Club is forecasting GDP growth will slow to 2.4% next year, from an expected 3.1%.

It also expects business investment will also taper off, from 9% in 2014 to 5.8% due to political uncertainty at home and abroad.

However, low inflation and interest rates should continue to sustain the economy’s expansion which will also be helped along by low commodity prices.

Peter Spencer, chief economic advisor to the EY ITEM Club, said: “Let’s be clear, the forecast for GDP growth is still relatively good. What has changed is the global risks surrounding the forecast and the headwinds facing investment by firms. Looming political uncertainty risks denting corporate confidence, the question now is how will these risks play out?

“I expect caution to become the order of the day. Mortgage lenders and borrowers have already shown greater restraint following the Mortgage Market Review and the prospective increase in interest rates. Given the weakness of commodity prices and wages I doubt that the MPC will be in any hurry to raise interest rates.”