Think tank warns of ‘unbalanced’ UK economic recovery

The National Institute of Economic and Social Research (Niesr) has upgraded its predictions for UK economic growth in both 2013 and 2014, but has warned the recovery is “unbalanced”.

The think tank now predicts that the economy will grow by 1.2 per cent in 2013 and by 1.8 per cent in 2014, and increase of 0.3 percentage points from its previous predictions for both years.

The improving outlook is down to a predicted increase in consumer spending, though the think tank said this increase would be at the expense of household saving, rather than due to any increase in real disposable incomes.

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However, with the rise in spending yet to be matched by a “significant contribution from net trade and gross fixed capital formation”, the Niesr said the economic recovery would be “unbalanced”, which it said was “worrying from a long-term perspective”.

The think tank also predicted that inflation would hover around 2.5 per cent for this year before dropping a few percentage points in 2014, while unemployment will remain close to 8 per cent both this year and next.