Business spending to grow for two years, forecast Ernst & Young

Business spending will grow tentatively over the next two years, according to a new report from the ITEM Club, an economic research group established by Ernst & Young. It predicts that overall spending by businesses will grow by just over three per cent this year and a further 8.1 per cent in 2014. This is good news following a number of recent economic forecasts but means that spending will remains some way short of its pre-downturn peak. The ITEM Club also called on the UK Government to do more to stimulate growth.

The report suggests that company spending is being held in check by continued uncertainty in the UK and overseas  even though more and more companies are enjoying improved cash flow. “Businesses have been shell-shocked by the experience of the financial crisis and it’s taking time to recover,” says Ernst & Young’s chief economist Mark Gregory. “Companies have the finance available to invest and expand into new markets, but a pervasive nervousness is causing many to sit on their hands until they see signs of a sustained recovery.”

The report’s forecast of growth for the UK economy is just 0.9 per cent this year, rising to 1.9 per cent growth in 2014 and 2.5 per cent by 2015. Peter Spencer, chief economic adviser to the ITEM Club, claimed that the £5 billion investment in infrastructure promised by the chancellor in the Autumn statement, was a “missed opportunity” to boost the economy, calling on the government to take a more positive approach.