UK economic growth will slow down sharply this year, but the economy is sufficiently robust to avoid falling into a recession, it has predicted.
According to Ernst & Young's ITEM Club, which uses the same economic model as the treasury, the economy will grow by 1.8 per cent this year.
This is down 1.3 per cent from the rate of 3.1 per cent recorded during 2007.
However, the economy will remain "fundamentally strong" and the outlook will more likely be one of "economic rebalancing rather than recession", the report said.
Peter Spencer, chief economic advisor to the ITEM Club, said: "The economy is in good health and employment levels are at their highest ever.
"As the Bank of England's interest rate cuts begin to take effect, the economy should pick up... touching wood, 2008 should not be such a bad year after all."
The ITEM Club also predicts that the Bank of England will cut interest rates three times this year, by a quarter of a percentage point on each occasion, and that by 2009 the economy will have recovered sufficiently to post growth of 2.9 per cent.
