Capital Economics, founded by Treasury adviser Roger Bootle, has said that it believes the UK economy will improve from 2015 forward, growing by 4% a year in the latter half of the decade.
It said the recession seems to have done little in the way of permanent damage and that the economy should benefit as its supply potential recovers.
This is a stark turnaround for Capital Economics, which has a long-established reputation for pessimism.
Indeed, just last month the consultancy was predicting annual growth for this year of just 0.2%. It has now revised this estimate up to 0.8% for this year, rising to 1.5% next year and 4% after that.
While gross domestic product is 15% below the level it would have reached under the pre-recession trend, Capital said it iss unlikely the recession permanently eliminated this much supply potential.
Growth could be bolstered “as these idle resources are fully utilized,” it said.
“What’s more, we believe that the type of growth will be more favorable. With the manufacturing, energy and construction sectors leading the way, the economy should finally become better balanced.”
