Britain is now approaching full employment, if the conclusion of the latest Item Club forecast from Ernst & Young is to be believed.

According to the organisation, the final quarter of 2004 will see the UK hit the government’s definition of full employment, which accounts for a maximum of a 2.5% claimant rate for unemployment benefits.

Companies are now spending money both on recruitment and capital investment, rather than cutting headcount and budgets, and this will drive the move to full employment, said the report.

Much of this increase in spending has happened in the public sector, where investment was up 7%. In the corporate sector, business investment rose by 6%.