The rising levels of immigration that the UK has experienced over the past decade could help the country's economy to perform ahead of expectation, a new report says.
Today's one-off study from the Ernst and Young Item Club says that the economic impact of an influx of overseas workers, particularly from central and eastern Europe, since 2004 may unlock additional growth potential in the economy.
The Treasury estimates that the economy will grow by 2.5 per cent over the next two years, but the Item Club estimates that growth of three per cent is more realistic, a difference of about one per cent in terms of GDP.
Analysts from the Item Club also believe that a rising proportion of older workers could help to lower prices and further boost growth.
Peter Spencer, chief economic advisor at the thinktank, said: "Quite simply the UK's labour supply has expanded in the last decade, largely because of the influx of immigrants to the UK from the EU accession countries since 2004.
"There has also been a significant rise in the numbers of older and retirement age workers – offsetting a decline in the number of 16-24 year olds in employment," he added.
Mr Spencer explained that the UK economy "has more room to grow than anyone thought", describing immigration since 1999 as the "single biggest impact on the growth of the population" and an "increasingly important feature".
About 600,000 economic migrants arrived from central and eastern Europe since the enlargement of the EU in 2004, while the country experienced its fastest period of population growth during the last 12 months since 1965.
"Immigration will continue to have a positive impact on the UK economy over the next few years, but the magnitude of immigration, and therefore the growth in the labour force, is highly uncertain," the economic advisor concluded.