U.K. Record-Low Inflation Trumps Politics for Economy, EY to Say

Houses Of Parliament
The Houses of Parliament and the Elizabeth Tower, stand on the banks of the River Thames in London. Political uncertainty was the most worrying issue cited by economists in a Bloomberg survey last month, where 48 percent ranked it as the biggest risk to the recovery. Photographer: Matthew Lloyd/Bloomberg

The U.K. economy is set to remain unscathed by uncertainty surrounding next month’s general election, according to a report to be published on Monday.

An improvement in the euro area and weak price growth will allow gross domestic product to continue expanding, EY’s Item Club will say. It forecasts that GDP will rise 2.8 percent this year and 3 percent in 2016.

“The economy is taking the general election in its stride as ‘noflation’ trumps politics,” Peter Spencer, chief economic adviser to Item Club, will say. “The euro-zone recovery is bedding in and completes the positive U.K. growth picture that we anticipate.”

Political uncertainty was the most worrying issue cited by economists in a Bloomberg survey last month, where 48 percent ranked it as the biggest risk to the recovery. With the election less than three weeks away, the polls are too close to call, and investors are bracing for the possibility of coalition negotiations or a minority government reliant on smaller parties to get legislation through parliament.

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