View more on these topics

UK needs to learn from Fed’s innovative policy, says ITEM Club

London UK Parliament Fog 480

The Government and the Bank of England need to develop a more innovative approach to fiscal and monetary policy, according to Ernst & Young ITEM Club.

In its Winter Forecast, the consultancy predicts that the UK economy will expand by just 0.9% over the course of 2013 and said the country can expect “sluggish growth” for the coming years unless a fresh approach to macroeconomic policy is found.

Ernst & Young ITEM Club chief economic adviser Peter Spencer says: “The UK has crawled out of recession but the Government’s mid-term report card should read ‘could do better’.

“Innovative policies from the Federal Reserve have helped to put the US economy in a stronger position to withstand tax increases and spending cuts. A fresh approach to monetary and fiscal policy in the UK could help open the door to long-term sustainable growth.”

One area that the report highlights is infrastructure. The ITEM Club claims the package of infrastructure spending announced in the UK Autumn Statement had the potential to be “a real game changer” – but there should have been more than £5 billion committed to the scheme.

In the short term, the ITEM Club expects consumer spending to drive UK growth. Consumer spending is forecast to increase by 1.1 per cent in 2013 and by 2 per cent in the following year.

“The consumer revival is well under way and is one of the few bright spots in our forecast,” Spencer says.

“By the end of the year earnings are expected to be outpacing inflation for the first time since 2007, while nearly a quarter of a million people are likely to be added to the UK pay roll. But this is by no means a long-term solution to UK growth.”

Spencer adds that “the clouds of uncertainty” hanging over the UK economy are starting to clear – but this only reveals “a low-growth landscape” populated by confidence-lacking consumers and business and the need for greater initiative on the part of policymakers.

“Plan A is still working but, for a real step change in the UK’s growth prospects, we will need to see a more imaginative approach to monetary and fiscal policy this year,” he concludes.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm