UK's economy 'best since 1990s'

The UK economy is said to be in its best shape since the 1990s

The UK economy is now in its best shape since the 1990s and will grow by 3.5% this year and 3% in 2005, according to an influential economic think tank.

Further boosted by a strong global economy, the UK's growth will be robust over the next two years, said Ernst and Young's Item Club report.

Yet it cautioned that Chancellor Gordon Brown was spending too much, and that UK public debt was becoming a problem.

The report said the housing market would start to slow down but not crash.

"With a global economy firing on all four cylinders and a UK economy in its best shape since the late 1990s, we can look forward to robust growth in the next two years," said the Item Club's chief economic adviser Peter Spencer.

And while it cautioned that the UK's high public deficit was unwelcome, it said the very low level of unemployment was a "ringing endorsement" for the government's running of the economy.

On house prices, the report said values would only increase at a modest level over the next few years, rather than the rapid growth of recent times.