Ernst & Young: ITEM Club calls for Treasury to sign £14bn cheque for two-year investment

By Rob Starr, Content Manager, Big4.com

According to the Ernst & Young ITEM Club, a £14bn injection of infrastructure spending for shovel ready projects in this month’s Autumn Statement would add 0.5% a year to GDP, improving the UK’s short-term economic growth prospects.

Infrastructure spending has almost halved in four years from £51bn in 2009/10 to £27bn in 2011/12, damaging the recovery of key sectors such as construction and reducing GDP by just over 1.5%. Yet the Ernst & Young ITEM Club says capital spending is widely acknowledged to have the highest impact multiplier of all the fiscal tools available to the Chancellor to kick-start growth.

In the report the Ernst & Young ITEM Club also calls for fiscal stimulus to ease the plight of First-Time Buyers (FTBs). It says that now the banking sector is healthier than it has been since the start of the financial crisis, and with Funding for Lending likely to increase the supply of mortgage funding, attention should now be turned to FTBs.

The report also says that much has moved on since the OBR published its last economic forecast in March. In the last eight months the Eurozone crisis has decimated UK exports and persistently high inflation has delayed the consumer recovery, while the slump in North Sea oil and gas production has created a hole in the Treasury’s tax receipts.