Upbeat verdict on Shropshire economy but warning on mortgage rates
Business leaders in Shropshire today gave their most upbeat verdict on Shropshire's economy for seven years – but warned householders that mortgage rates will rise.
The British Chambers of Commerce has upgraded its growth forecasts for the UK economy, and says it expects the annual GDP growth rate to hit its highest level since 2007.
But interest rates are also expected to soar from 0.5 per cent to 2.25 per cent within two years, putting a strain on house owners with mortgages.
Business leaders say they expect Britain's GDP to grow by 3.2 per cent over the course of 2014, having previously forecast expansion of 3.1 per cent for the year.
The business body has also upgraded next year's forecast from 2.7 to 2.8 per cent, but 2016 remains unchanged at 2.5 per cent.
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Shropshire Chamber of Commerce's chief executive Richard Sheehan said the recession is well and truly behind us in the county – but warned of rate rises and possible trouble ahead if Scotland votes for independence.
He said: "The national forecast reflects much of the intelligence we are gathering in Shropshire through our daily activities and our Quarterly Economic Survey.
"We are privileged to be engaging with businesses who appear to be in a very positive frame of mind, and who have a good outlook for the remainder of this year and going into 2015.
"There are still things that can derail that, and we await the outcome of the Scottish independence referendum, and we have to be mindful of that, but primarily it is good news for the country and for Shropshire."
Britain's economy passed its pre-recession peak in the last quarter, and the chamber now expects growth to continue at a rate of 0.8 per cent in the third quarter of the year. However, exports of goods and services have been heavily downgraded, from 1.9 per cent to 0.8 per cent for this year – after weaker than expected figures in the second quarter – and from 4.2 to 4.1 per cent next year.
The national body says interest rates are likely to rise in the first quarter of next year, to 0.75 per cent. By the end of 2016, it expects rates to be up to 2.25 per cent.
The gradual slowing of economic growth in 2015 and 2016 will come as a result of deceleration in household consumption, partly because of rising rates, and falling public spending, and BCC director general John Longworth, who visited Shropshire earlier this month, says this is a "warning sign".
"The task at hand is to ensure that the stellar 2014 growth is not a flash in the pan," he said. "We need to invest and export more, innovate, and build."
"To sustain investment momentum into the future, the Government and the Bank of England need to give businesses the confidence they need to invest by keeping official interest rates low for as long as possible. Any future rate rises must be gradual and modest."