THE prospects for a sustainable recovery in the UK will be dented by next year's General Election and rising geopolitical risks, according to one of the most respected economic forecasts.
Growth will also be hit by the "dreadful" outlook for exports resulting from the eurozone's continuing woes, says the EY Item Club.
The club, which uses the same models as the Treasury, will in its autumn forecast today say that while the UK is expected to grow by 3.1 per cent this year, the fastest in the G7, next year will see a dampening of business investment which will slow the pace to 2.4 per cent. The report says: "The growth in the economy over the last 18 months shows all the hallmarks of a recovery in confidence and appetite for risk, but now geopolitical events add to the uncertainty over the UK General Election, which could be followed by an EU referendum in 2017. These worries could be enough to hold back investment, further delaying the rebalancing of the economy away from consumption." Chief economist Peter Spencer says the MPC "won't be in any hurry" to raise interest rates.
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