BCC: UK economy will surpass pre-recession peak in 2014
The UK economy will finally surpass its pre-recession peak next year, says the British Chambers of Commerce (BCC).
The UK's economic output peaked in the first quarter of 2008. The BCC says it expects the economy to surpass that level in the second half of 2014.
It also says that the UK's GDP is now set to grow by 2.7% in 2014, an upgrade from a previous prediction of 2.2%.
BCC head John Longworth welcomed the improvement but warned that longer-term problems were "still looming".
Mr Longworth said: "It is really great that next year the UK economy is finally expected to bounce back from the deepest recession in modern times."
But he added: "As household consumption slows in the medium term, we have to find ways of boosting business investment and exports, as rebalancing our economy is critical to our long-term economic future.
"If we make important decisions to fix the long-term structural failure in business finance, continue to deliver a major infrastructure upgrade and do more to support exports, it is possible to achieve not just a good recovery, but a truly great and sustainable economy."
As well as increasing its growth forecast for 2014, the BCC also slightly raised its forecast for this year, from 1.3% to 1.4%. However, it lowered its 2015 prediction from 2.5% to 2.4%, saying that high personal debt levels would reduce households' consumption, which accounts for two-thirds of UK GDP.
The BCC also revised its view on when the UK's jobless rate might fall to 7%, a level seen by the Bank of England as a necessary condition for future interest rate rises.
"We forecast that the 7% unemployment rate threshold will be reached in [the third quarter of] 2015, one quarter earlier than we predicted in August. However, the [Monetary Policy Committee's] suggestion that there is a 40% probability that this could be reached by the end of 2014 is too ambitious in our view," the BCC said.
It said that as a result, it expected interest rates to rise from their current historic low of 0.5% in the last quarter of 2015. An initial increase to 0.75% would be followed by a further rise to 1% in the first quarter of 2016.