AN ECONOMIST has predicted that steady growth for businesses should lead to interest rates remaining where they are through 2014 but prices will rise faster than wages, leading to a reduction in spending power.
In his annual round up of predictions for the year ahead, Stephen Boyle, head of economics at Royal Bank of Scotland, says 2014 will be much easier than previous years, but challenges are still round the corner for firms and their employees.
He said: “The spurt of growth that began in late spring will carry on in 2014. Just as this year has been better than last, so next year will be better than this. National income will increase by around 2.5 per cent, its average pace over the last 60 years.
“One result is that more people will be in work. They will be better off. But the fastest growth since 2007 will still leave many families feeling hard-pressed.
“In part, that is because prices will be rising faster than wages for most of the year. Our spending power will keep falling.
“Some businesses that cut shifts during the recession are still not working full-time.
“That means the Bank of England can keep interest rates just where they are throughout 2014. It will be 2015 or later before they rise. Even then, it will be years before they return to what we thought were normal levels before 2009.”