The coalition government have been given a boost after it was estimated today that the economy will grow by substantial 2.5% over the course of this year by the National Institute of Social and Economic Research (NIESR).
The announcement comes just weeks after the Office for Budget Responsibility and the International Monetary Fund made a similar forecast, and has compelled the NIESR to identify that the countryís recovery is now ëentrenchedí.
The think tank also reserved a positive forecast for the unemployment rate this year, estimating that it will drop to under 7% of the course of this year.
The news highlights the remarkable turnaround in the UKís economy over the past 6 months, with the countryís housing, construction and labour markets all showing signs of revitalisation in the latter stages of 2013.
Indeed, the staggering rate in which the economy is growing has compelled many economists to call for interest rates to be raised from their historically low 0.5%, who have argued that it is the right time considering the huge drop in unemployment and upturn in the Labour market across the UK.
“The UK’s economic recovery is entrenched,” the NIESR said in a statement. “Above trend growth returned in 2013, while the remarkable performance of the labour market persists.”
“We expect consumer spending to remain the key driver of recovery in 2014 and 2015, supported by continued buoyancy in the housing market.”
Wage problems remain
The NIESR identified that the staggering rate in which unemployment has fallen and an increase in property prices stimulated by the governmentís Help to Buy and Funding for Lending schemes has enabled consumers to have a greater level of spending power.
This, they argued, has been the driving force behind the countryís recent economic performance, though they added that improvements in the previously stuttering labour and construction industries were also contributing to todayís success.
Nevertheless, the complexion of worker wages across the UK remains a problem, with growth in their take home salary still moving at a rate slower than inflation.
The reality of this has been reflected in the Bank of Englandís move away from employment as a parameter to link interest rate rises too, and it is thought that they will announce a new direction for their forward guidance policy next week.
Martin Dougal, senior partner at KPMG, said: “I think we have had a number of months now with good economic news coming through and there is generally an increase in business confidence, in consumer spending, and in growth we are seeing across the country.
“That is now beginning to feed through to employment prospects, which are good, for many people – particularly those with good marketable skills.”
Mr Dougal argued that the recent performance in the professional service and construction industries has meant that they are now able to employ more individuals today, and identified that this trajectory will need to continue in order for the quality of employment to improve across the country and by extension workers wages across the UK.
He did however cite that many of those who had found employment in recent times, had done so in short term placements, and argued that more work needs to be done within the countryís labour industry in order to ensure that people found high quality work that offers a greater level of income.