UK economic growth is expected to accelerate in the second half of 2006, according to a new report.
Research by BDO Stoy Hayward, the accountants and business advisers, reveals a leap in business confidence in both the short and medium term.
Growth is expected to reach 3.4% in the third quarter of 2006, compared to 2.4% in the final quarter of 2005, and to continue at this level until the end of the year.
The BDO Business Trends Report suggests the UK economy will provide a pleasant surprise for businesses and the chancellor alike later this year.
Contributing factors include a consumer spending rebound, European economic recovery and a rapidly rising stock market.
The report also reveals that expectations regarding UK inflation levels are falling, with inflation expected to be 2.2% in the third quarter of 2006.
With strong growth predicted and inflation still expected to move above the Bank of England's 2% target, those who have been clamouring for a cut in interest rates are likely to be disappointed.
The report predicts that the Monetary Policy Committee (MPC) will keep interest rates on hold for the rest of 2006.
Peter Hemington, partner at BDO Stoy Hayward, said: “Short-term confidence has risen to its highest level in over two years and it is good to see that medium-term confidence has stabilised at its highest point since last April.
“Businesses are responding by planning for better times ahead - stocks are being built up and capital expenditure looks set to rise in the coming months.”
