BBC News reported today that the Chancellor’s economic plans are ‘risky’, and could contribute to a slowdown in UK growth.

Pressure on business?

The EY Item Club, which uses the same economic model as the Treasury, said that UK economy was strong, this being mainly due to low inflation driven by low oil prices.

However, inflation is forecast to rise whilst consumer growth is predicted to slow, these factors contributing to an overall slowdown in UK growth. In addition, Mr Osborne’s plans could put pressure on businesses, due to their having to bear more responsibility for low wage employees through the National Living Wage.

EY Item Club expects UK GDP growth to reach 2.7{06aeb1921e0b802d2bd9c766bc98fb11cc6a46c2b0593ed9c88a0e29cf417a34} for 2015 and 2016 before it slows to 2.4{06aeb1921e0b802d2bd9c766bc98fb11cc6a46c2b0593ed9c88a0e29cf417a34} in 2017 and 2018.

However, the Treasury said that “hard work on economic recovery is now paying off as people see their pay packets growing faster, which will be helped further by the new National Living Wage”.