A study has predicted that GDP in 2007 will rise by 2.9 per cent as the City continues to drive corporate activity.
The study by the Item club, sponsored by law firm Ernst & Young, investigates implications behind government forecasts by using the HM Treasury model of the UK economy.
Chief economic advisor to the Ernst & Young Item Club, Peter Spencer, said: "Stock exchange and mergers and acquisitions transactions have been steaming ahead and business investment has picked up in the last twelve months, helped by the buoyant economy and rising profitability."
The report by Item also predicts that business investment will grow by another 7.5 per cent in 2007.
However the forecasting group warned that the high street would not be as upbeat as corporate Britain. "With the personal tax burden at record levels and high utility prices, it's not surprising that the consumer is feeling a bit short-changed," Mr Spencer added.
Pay packets are also forecast to increase this year, with strong growth in UK labour supply "based on immigration and the return of older workers to the workforce."
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