PwC: Economy on road to recovery

The North West economy is showing clear signs of recovery, according to analysis by PwC in its latest UK Economic Outlook report.

The report projects North West GDP growth will pick up from 1.6% last year to around 2.9% in 2014, revised up from the 2.4% projected in March 2014.

This is in line with the predicted growth for the UK economy, around 3.0% in 2014, which is expected to ease slightly to 2.6% in 2015 as consumer spending growth moderates. London is expected to continue to lead the recovery with growth of 3.4% in 2014, but all regions should see growth of above 2% this year.

Iwan Griffiths, PwC's North West chairman, said: "These latest figures show the North West economy is now gathering real momentum as business investment starts to pick up. Unemployment across the region has also reduced, with the latest figures showing it fell by 10,000 in the quarter to May 2014.

"In addition, inflation has fallen faster than expected recently, and we expect it to remain at or slightly below target in 2014-15. As a result, we expect the MPC to keep interest rates on hold in the short term but then to increase them gradually from late 2014 or early 2015 onwards, perhaps returning to around 4% by 2020.

"While higher interest rates will help savers and reduce pension fund deficits, households need to bear in mind likely future interest rate rises in any decisions on mortgages or other longer term loans."

PwC's report also reveals the UK housing market has leapt back into life over the past 12-18 months, with prices accelerating across all regions.

Under PwC's baseline scenario, North West house prices could rise by 7% this year. By the end of 2015 the average property in the region could be worth around £184,000, up from £163,000 at the end of 2013.

Griffiths added: "House prices in the region are accelerating but we do expect this to moderate over the next two to three years, slowing to 5.9% in 2015 and an average rate of around 4.1% p.a. between 2016 and 2020."