A retail recovery will mean a brighter year for the UK economy in 2006, a report has said.
The report predicts a real recovery on the UK High Street
Accountancy firm BDO Stoy Hayward says consumer confidence and spending will recover, aided by cooling oil prices and a stabilising housing market.
Its latest Business Trends Report predicts that as a result, the UK's GDP will rise by 2% in the first quarter of 2006, and then by 3% in the second.
The report also expects interest rates to remain on hold until the spring.
Regarding inflation, it says this will be on a downward trend in 2006.
The report's findings come despite a mixed retail sales picture over the festive season, with some retailers suggesting continuing tough times.
"A strong combination of stabilising house prices and cooling oil prices suggest that consumer confidence will improve in 2006, paving the way for a retail recovery," said BDO Stoy Hayward partner Chris Grove.
"Although we don't expect the MPC [the Bank of England's Monetary Policy Committee] to cut rates this month, it is likely that we will see a cut to 4.25% by the end of the year which will put more money into people's pockets and please UK businesses."
Douglas McWilliams, chief executive of the Centre for Economics and Business Research added that "after a gloomy 2005, signs of improving business and consumer confidence will help bring a smile to the face of retailers and suggest stronger economic growth in 2006".
BDO Stoy Hayward's report pools the results of all the main UK business surveys to come up with an overall average.