Thinktank says strong growth to be driven by high job creation, private consumption and investment

This article is more than 5 years old

This article is more than 5 years old

Britain’s economic recovery will continue into 2015 and 2016, driven by consumer spending and business investment, according to the Organisation for Economic Co-operation and Development.

The Paris-based thinktank said high job creation had fuelled UK growth, which it forecasts at 3% this year. The OECD is predicting growth of 2.7% in 2015 and 2.5% in 2016.

“Growth has been propelled by high job creation and is set to continue at a strong pace in 2015 and 2016, underpinned by robust private consumption and investment. Private consumption has been the main engine of the expansion, amid strong job creation, and business investment continues to recover strongly, supported by diminishing uncertainty,” the OECD said in its latest economic outlook report. “GDP growth is set to continue at a strong, if slightly easing, pace, despite fiscal consolidation.”

UK export growth has been weak so far, the organisation noted, pushing the current account deficit to close to 5% of GDP. It said exports could weaken further if eurozone growth comes in below expectations.

Wage growth – which has been unexpectedly weak in 2014 – should start to pick up, it said, adding: “Stimulating retraining and encouraging migration in occupations where shortages arise would reduce labour mismatches and support balanced growth through higher productivity.”

The OECD cautioned however that if productivity does not recover as expected, it could translate into weaker UK growth.

“Robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation.”