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British GDP to grow at 1.4 pct this year: ITEM Club

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British economy is projected to grow at 1.4 percent this year and 2.4 percent next year, after a poor 0.1 percent growth in 2012, said Ernst & Young ITEM club in its latest economy forecasts report on Monday.

The figures are slightly higher than those (1.1 percent and 2.2 percent) it gave three month ago.

Apart from the reviving housing market, it is increasingly evident that the reinvigorated consumer has pushed the British economy into a higher orbit, said London-based macro-economy forecaster.

Britain has seen some signs of economy recovery this year. The GDP of the second quarter in 2013 grew at 0.7 percent, or at an annualized rate of 2.9 percent.

The consumer spending of Britain is expected to grow at 1.6 percent this year and 1.9 percent next year, significantly higher than 1.2 percent in 2012, according to ITEM club's forecasts. Fixed investment, however, will soar at 6.5 percent in 2013 and 8.2 percent in 2014, compared to the minus 3.1 percent last year. And exports will probably grow at 2.5 percent and 5.3 percent accordingly.

Meanwhile, the percentage of net government borrowing to GDP will reach to 6.1 percent points this year, then drop gradually to 5.1 percent and 4.4 percent in next two years, said ITEM club. Current account balance as a percent of GDP will shrink from minus 3.8 percent last year to minus 3.2 percent and minus 1.1 percent these two years, then realize a 0.3 percent growth in 2016.

"Rising consumer spending and confidence alone will not be enough to deliver the escape velocity needed to achieve sustained growth. For this to happen, the engines of business investment and exports will also need to kick in. Fortunately, the outlook for both of these areas remains encouraging, suggesting that the pattern of growth will become more balanced," said Peter Spencer, Senior Economic Adviser to ITEM Club.

But he also warned that unforeseen events could disrupt this rosy scenario, not least new external shocks from left-field, as shown by the U.S. budget deadlock.

"One risk that we believe has been strongly overplayed is the danger that the UK government's initiatives to support the housing market will result in a housing bubble," Spencer added.

Investment in housing is forecast to rise 7.5 percent next year and an additional 10 percent in 2015, said ITEM Club earlier this month. Endi