The British economy will grow by 3.0 percent this year and interest rates will rise to 4.75 percent by December, a report by accountants Ernst and Young predicted on Sunday.
Ernst and Young's ITEM club, which uses the same economic forecasting model as the Treasury, said the economy was being supported by an improvement in the global economic picture, a recovering private sector and the continuing strength of the public sector.
"We now have a UK economy in a more robust state than for the last couple of years. It is possible that the Chancellor will meet the lower end of his growth forecasts for 2003 and 2004," said ITEM's chief economic adviser Peter Spencer.
Chancellor of the Exchequer Gordon Brown predicted in November that the economy would grow by 3.0 to 3.5 percent this year and next.
But the report said that Brown would still not meet his forecasts for tax revenues and repeated its warning that tax rates would have to rise if the Treasury was to meet its targets.
The ITEM club said the economy's feel good factor would begin to diminish as the year wears on, as interest rates peak at 5.0 percent by early 2005.
"We are moving into uncharted waters. With indebtedness and house prices reaching record levels, it is hard to know precisely what impact higher interest rates will have on the UK consumer," said Spencer.
Comments
Comments are closed.