UK economic growth to fall to 2.4% in 2015, says EY Item Club

The UK economy will grow by 2.4% in 2015, well below the 3.1% growth expected this year, forecasting group EY Item Club has said.

It says the forthcoming election and accompanying political uncertainty will hold business back from investing.

Growth will also be constrained by worries about the eurozone and the Ukraine conflict, EY Item Club says.

The 2.4% figure undershoots forecasts issued by the Bank of England, the CBI and the International Monetary Fund.

Last week, the Bank's chief economist, Andrew Haldane, said he was downbeat over the UK economy because of weaker global growth, low wage growth and financial and political risks.

He said interest rates should remain low to avoid long-term economic stagnation.

Peter Spencer, EY Item Club's chief economic adviser, said: "The forecast for GDP growth is still relatively good. What has changed is the global risks surrounding the forecast and the headwinds facing investment by firms.

"The UK's export outlook continues to look dreadful. The glimpse of economic rebalancing that we saw in the early part of this year has turned out to be a false dawn.

"Looming political uncertainty risks denting corporate confidence - the question now is how will these risks play out? I expect caution to become the order of the day."

He also said the Bank of England was unlikely to rush to raise borrowing costs in the face of falling commodity prices and low wage growth.

The report predicted inflation would remain low. It is currently at a five-year low of 1.2% and is likely to average 1.3% in 2015, EY Item Club said.

The Bank of England's most recent forecasts predict GDP growth of 3.5% this year and 3% next, while the IMF says it will be 3.2% followed by 2.7% and the CBI 3% and then 2.7%.