Economic growth in the UK could reach its fastest rate since 2008 this year, driven by falling oil prices and delayed interest rate rises.
The prediction was made by the EY Item Club, which has increased its forecast for UK growth in 2015 from 2.5 per cent to 2.9 per cent.
With growth returning, it estimates disposable incomes could have grown as much as four per cent by the time January 2016 arrives. This in turn could lead to housing market turnover rebounding.
According to the report, weak inflation has allowed the Bank of England to hold back on raising interest rates. Meanwhile, the falling price of commodities has helped major importers such as the UK and US.
But in order to benefit, UK businesses must adapt to the changes. Mark Gregory of the Item Club told the FT: “Original business forecasts for 2015 might now be too conservative, at least for consumer-facing companies. Businesses now need to dust off these plans and adjust them to reflect the new reality of falling oil prices and growing consumer spending”.
Not so bright for the Eurozone
The coming year is unlikely to hold such promise for the neighbouring Eurozone, despite a similar benefit from a fall in commodity prices.
The EU has fallen into deflation, according to recent figures, causing growth to stagnate. This has led to widespread expectation of the introduction of a first round of quantitative easing from the European Central Bank this week.