Ernst & Young ITEM Club UK Spring Forecast 2013
Economic forecast in summary
The UK Government’s long-term aim is to rebalance the economy away from consumption and towards exports and investment. With our European neighbours also pursuing higher exports, and UK businesses lacking the confidence to invest, these plans appear to be on hold.
We are forecasting GDP growth of 0.6% this year, increasing to 1.9% in 2014 and 2.5% in 2015. To find new or faster growth, the UK needs to act smarter. And with the Chancellor’s ‘Help to Buy’ measures, the Government has delivered. The scheme should trigger a sharp increase in house moves from their current low level in turn boosting housing-related spending and construction.
Pent-up demand is a powerful economic force, and the UK housing market has been in a straitjacket for five years. Last year, the suppressed demand showed up in sales of durables like white goods. With ‘Help to Buy’ the focus will switch to housing.
Taken together, all these factors herald an ongoing pick-up in both housing transactions and retail spending but a continuing struggle for exporters.
Peter Spencer, Senior Economic Adviser to the ITEM Club
The ITEM Club forecast for the UK economy, Spring 2013
% changes on previous year except borrowing, current account and interest & exchange rates
| Year | GDP | Domestic demand | Consumer spending | Fixed investment | Exports | Imports |
| 2010 | 1.8 | 1.5 | 1.3 | 3.5 | 6.4 | 8.0 |
| 2011 | 1.0 | -0.9 | -0.8 | -2.9 | 4.5 | 0.0 |
| 2012 | 0.3 | 1.5 | 1.2 | 1.5 | -0.2 | 2.7 |
| 2013 | 0.6 | 1.0 | 1.2 | 1.2 | 0.6 | 1.4 |
| 2014 | 1.9 | 2.1 | 1.9 | 7.0 | 4.4 | 4.6 |
| 2015 | 2.5 | 2.4 | 2.2 | 7.9 | 5.9 | 5.4 |
| 2016 | 2.5 | 2.2 | 2.4 | 6.0 | 5.7 | 4.9 |
| Year | Net government borrowing [*] | Current account [% of GDP] | Average earnings | CPI inflation | 3-month interest rate | Effective exchange rate |
| 2010 | 9.4 | -2.5 | 2.4 | 3.3 | 0.7 | 80.5 |
| 2011 | 7.7 | -1.3 | 2.6 | 4.5 | 0.9 | 79.9 |
| 2012 | 5.7 | -3.7 | 1.6 | 2.8 | 0.8 | 83.0 |
| 2013 | 6.7 | -3.7 | 1.9 | 2.8 | 0.5 | 79.9 |
| 2014 | 5.8 | -3.1 | 3.1 | 2.6 | 0.5 | 79.3 |
| 2015 | 4.9 | -2.2 | 4.0 | 2.6 | 1.0 | 78.5 |
| 2016 | 3.3 | -1.5 | 4.7 | 2.5 | 2.0 | 77.7 |
| [*] Fiscal years, as % of GDP Source: ITEM Club | ||||||