Business investment and exports are likely to take over from housing and consumption as the driving force of economic recovery next year, according to the autumn forecast of the EY (formerly Ernst & Young) Item Club, giving the UK economy a better balance.

Growth in 2013 is expected to hit 1.4 per cent, far above the 0.7 per cent forecast by the Office for Budget Responsibility in March, with an acceleration to 2.4 per cent in 2014, close to Britain’s long-term average.

The UK was “finally on the move”, said Mark Gregory, Ernst & Young’s chief economist, adding: “It’s perhaps unsurprising that business investment to date has been cautious. But with the recovery now gathering pace, businesses will need to keep a close eye on economic indicators to ensure they are ready to move when the tide turns.”

The more positive forecast reflects the rapidly improving business conditions in Britain. The UK received the largest forecast upgrade of any leading economy from the IMF at last week’s annual meetings and was singled out for the praise.

Professor Peter Spencer, chief economic adviser to the Item Club, said one of the most important reasons for the upturn in sentiment and spending was the government’s initiatives to get the housing market moving again.

Coming to the aid of George Osborne, chancellor, who has been under fire from the majority of economists for artificially stoking up demand in the housing market, Prof Spencer said the interventions into the mortgage market were well-timed and targeted. -(The Financial Times Limited 2013)