[LONDON] British economic growth could be stronger than expected this year, boosted by lower oil prices and flat inflation that will encourage consumers to spend, according to an influential report published Monday.

The EY ITEM Club's winter forecast predicted gross domestic product growth of 2.9 per cent in 2015 - higher than its previous estimate and stronger than the government's prediction of 2.4 per cent.

The report said lower oil prices would keep inflation at near zero in 2015, boosting the spending power of consumers.

The Bank of England is likely to keep interest rates at their current record low of 0.5 per cent until spring 2016, the report said, followed by a slow rise of 0.25 percentage points every three months.

"Not every economy will be a winner from oil prices collapsing, but the UK certainly is," said EY ITEM Club chief economic adviser Peter Spencer.

"While it is not a game changer in terms of growth prospects, falling oil prices come just as the recovery was losing momentum and will move the game up to a higher level for a year or two." The report predicted wage growth of 3.5 per cent in 2015, resulting in a 3.7 per cent rise in real disposable income and an increase in household consumption.

Britain's finance minister welcomed the report as "further proof that our long-term economic plan is working".

AFP