Economists raise UK forecasts for growth

INDEPENDENT ECONOMISTS have upped their forecasts for UK growth for the first time in more than a year, according to figures released yesterday, with the bulk of experts now confident the economy will escape recession.

The latest set of independent forecasts released by the Treasury show that the consensus growth estimate for 1999 is now 0.7 per cent, compared to an estimate last month of 0.6 per cent. Although this is still significantly below the official Treasury estimate of growth of between 1 and 1.5 per cent, the figures reflect a growing belief in the City that the UK economy has turned the corner.

Independent growth estimates for 2000 have risen from 1.8 per cent last month to 1.9 per cent this month, while inflation is expected to remain benign throughout this year and next.

A separate survey released yesterday by the investment bank Merrill Lynch provided further evidence of the tide of economic optimism sweeping through London's financial markets. Eighty-three per cent of UK fund managers expect the British economy to be stronger a year from now, compared with a record low of just 3 per cent back in September.

Bulls of profits outnumber bears for the first time, according to the Merrill Lynch/Gallup survey, with the average forecast for 1999 earnings per share growth up from just 0.8 per cent in January to 4 per cent. The City's fund managers expect the economy to grow by 1.1 per cent this year, and by 2 per cent in 2000.

Trevor Greetham, global strategist at Merrill Lynch, said: "The UK U- turn has been astounding. All talk of recession is gone. Economic optimism is surging in Europe, the UK, Asia and Africa; 1999 may turn out to be a surprisingly strong year."

Meanwhile, a report from the consultancy Business Strategies also predicted that the UK would escape recession. However, the consultancy warned that the economic outlook could vary considerably from region to region, and that output could fall in both Scotland and the North-east.

Dr Neil Blake, research director of Business Strategies, said: "Weak output growth compared with continued rises in productivity will mean that the number of people in jobs will fall."