The British economy is set to grow at its fastest pace in seven years in 2014, driven by a surge in household consumption, the British Chamber of Commerce has said.
The business body said its expects the UK economy to grow by 2.7 per cent next year, up from a previous forecast of 2.2 per cent, surpassing the pre-crisis peak registered in the first quarter of 2008.
It also upgraded its forecast for this year to 1.4 per cent from 1.3 per cent but downgraded its prediction for 2015 to 2.4 per cent from 2.5 per cent indicating that higher personal debt could lead to a slowdown in consumption.
The BCC warned that a sustainable recovery cannot be based on household consumption and a booming housing market alone, in line with comments made by Chancellor George Osborne, who called for a more "balanced economy" last week.
"As household consumption slows in the medium term, we have to find ways of boosting business investment and exports, as rebalancing our economy is critical to our long-term economic future," said BCC head John Longworth.
"If we make important decisions to fix the long-term structural failure in business finance, continue to deliver a major infrastructure upgrade and do more to support exports, it is possible to achieve not just a good recovery, but a truly great and sustainable economy."
The BCC also indicated that it expects unemployment to hit the 7 per cent threshold in the first quarter of 2015, one quarter earlier than previously forecast.
The unemployment rate is closely monitored by the Bank of England, which has indicated that a hike in interest rates, currently at a record low of 0.5 per cent, would only be triggered if unemployment falls below 7 per cent.
The BCC expects rates to stay unchanged until the last quarter of 2015, with the Bank's easy money programme providing support for the economy until at least the first quarter of 2016.Reuse content