General Election 2015: ‘Noflation’ trumping politics – EY
THE UK economy will continue to grow solidly in 2015 despite the political uncertainty of the General Election on May 7, thanks to the boost provided by ultra-low inflation and an upturn in the Eurozone recovery.
This is the view of the EY ITEM Club’s spring forecast, which points to the positive effects of low oil prices and falls in other commodity values, along with a strong pound importing low inflation, as reasons for the UK’s economic momentum.
The benign environment for inflation is amplifying the benefits of high employment, boosting consumer confidence and allowing shoppers’ wallets to stretch further.
The added bonus to this favourable outlook, according to the forecast, will come from an increasingly robust recovery in the Eurozone.
The Eurozone recovery was already gathering steam before the start of Quantitative Easing and is now being reinforced by the European Central Bank’s (ECB) bond buying programme.
This strengthening recovery in the UK’s biggest export market should be enough to offset some of the negative effects of the strong pound on UK firms selling overseas.
As a result the accountancy firm’s ITEM Club expects GDP growth to reach 2.8% for 2015 and 3.0% for 2016, a much more positive outlook than forecast by the Office for Budget Responsibility alongside March’s Budget.
Peter Spencer, chief economic advisor to the ITEM Club said: “The economy is taking the General Election in its stride as ‘noflation’ trumps politics. The Eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.
“This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums.
“If the strength of the headwinds that held back the economy during the first years of the coalition is anything to go by, the tailwinds enjoyed by a new administration post May 7 should be strong enough to outweigh the effects of any political uncertainty.”
