BRITISH Chambers of Commerce has raised its forecasts of UK growth for 2014 and 2015, but warned of the dangers of over-reliance on consumer spending.
Publishing its latest forecasts today, British Cham-bers highlights its view that rises in benchmark UK interest rates will have a significant dampening effect on some households and the economy as a whole.
And it urges the Bank of England to keep base rates low for as long as possible.
It also flags the weakness of UK export growth.
British Chambers has increased its forecast of growth in UK gross domestic product this year from 3.1 per cent to 3.2 per cent. And it has raised its prediction of growth in 2015 from 2.7 per cent to 2.8 per cent, while holding its estimate of expansion in 2016 at 2.5 per cent.
Director general John Longworth described the expected slowdown in 2015 and 2016 as a "warning sign" for the UK, and flagged an over-reliance on consumer spending as a growth driver.
David Kern, chief economist at British Chambers, said: "We predict strong growth of 0.8 per cent per quarter in the second half of this year. But as interest rates start to rise in 2015, indebted households with mortgages will face increased financial pressures, and much weaker household consumption will act as a drag on growth."
He added: "Greater efforts to boost exports and investment, and avoiding premature interest rate increases, will ensure that the recovery is sustainable and that the pace of growth can strengthen in the future."
British Chambers forecasts the first rise in UK base rates will be a quarter-point increase to 0.75 per cent, and will occur in the first quarter of 2015.
It says further modest increases in official rates can then be expected, in small steps of 0.25 percentage points, with base rates reaching 1.25 per cent in the fourth quarter of 2015 and 2.25 per cent in the final three months of 2016.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article