Low Productivity Poses Risk To Britain's Recovery - Niesr

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http://uk.reuters.com/article/2014/02/07/uk-britain-economy-growth-idUKBREA1600620140207

Britain's economy will pick up pace this year but lagging productivity poses a risk for the country's medium-term outlook, a leading economic research body said on Friday.

The National Institute of Economic and Social Research expects the economy to grow 2.5 percent this year, raising its forecast from 2 percent in November and bringing its view into line with the consensus in a Reuters poll last month.

NIESR then expects growth to ease to 2.1 percent in 2015, a slightly sharper slowdown than most other economists expect.

Britain posted 1.9 percent growth in 2013 - its fastest since the financial crisis - but the rebound has relied heavily on consumer spending, raising doubts over how long it can last as wage growth fails to keep pace with inflation.

While NIESR expects consumer spending to remain the key driver of growth over the next two years, underpinned by a buoyant housing market, it also predicts that "robust growth" in business investment will support the recovery.

But low productivity would continue to pose a challenge for the economic outlook as it limits wage growth, it said.

The medium term outlook for the recovery is looking weak..