Sunnier time for economy ahead, says top forecaster

THERE are sunnier times ahead for the UK economy according to one of the City’s most closely watched forecasts, which today predicted better growth and interest rates under 5% by the end of the year.

- Michael Hunter

The EY Item Club’s hotter summer forecast was “a significant upgrade” it said, compared with its last update in spring.

It now expects growth of 1.1% for 2024, up from the 0.7% predicted in April.

Hywel Ball, EY’s UK chair, said: “The UK’s economic recovery is under way,” adding: “With inflation predicted to remain relatively stable and consumer spending set to climb, growth should continue … but it’s expected to be more steady than spectacular”

There was also renewed hope for borrowers, who have been dealing with the impact of the 16-year high on Bank of England interest rates at 5.25%, which sets the cost of millions of mortgages and other variable-rate loans and has been in place since August 2023.

Today’s forecast predicted that the BoE would be able to cut rates to 4.75% by the end of the year.