Short-term growth prospects for the UK economy are “pretty sound”, Aito Conference 2014 delegates have been told.
Charles Davis, director of the Centre for Economics and Business Research, said there “reasons for optimism” for the tourism industry.
He cited the drop in oil and food prices expected next year as an example of the positive prospects which will help increase consumers’ spending power on holidays.
“For the short term there are some reasons for optimism. We are likely to see food prices come down in 2015 and we [consumers] will have more purchasing power. The drop in oil and food prices could be a major shot in the arm for the economy and that will help drive growth next year,” he said.
He added: “The UK story is pretty boyuant. It was almost a surprise to see prime minister David Cameron issue a warning about the economy recently because the UK has been growing at a robust rate: we have had the longest period of growth since before the economic crisis. My expectation would be for real incomes to grow at the fastest pace next year since the economic crisis.”
The outlook for the UK is “much stronger” than the rest of the eurozone, but Davis admitted the UK’s growth still lagged behind before 2008, with the country’s budget deficit still the major issue for concern.
“We are not seeing anything like the growth we saw before the financial crisis in 2008-2009 and we think this is the peak of the cycle for now, with growth coming back again in 2015,” he said, adding that companies had to consider what impact an inevitable rise in interest rates would have on their customers.
“We have to expect interest rate rises, so how resilient will households be when that happens? It’s something to have in our minds.”
The global economy should also see growth and “pick up in the short term”, he said.
“The global economy is growing relatively slowly, for economic reasons in the Eurozone. Japan has fallen back into recession, the US is growing quite robustly and we will see growth continue to slow in China in the coming years. But we are still talking about a 7% growth rate for the Chinese economy,” he said.