UK Economy Outlook 2025
Investing.com – The UK economy is projected to grow by 1.5% in 2025, up from 0.9% in the previous year, according to UBS analysts.
Growth Factors
In a note to clients, the analysts highlighted that a “less contractionary fiscal policy” could provide the British economy with a “decent amount of momentum” this year.
Challenges Ahead
However, the private sector may face challenges from high taxes, borrowing costs, and wage expenses. Official figures from December indicated that the UK economy showed no growth from July to September, marking a sluggish start for Prime Minister Keir Starmer‘s government, with the Office for National Statistics revising GDP output to 0.0% from a previous expectation of 0.1% growth.
Government Actions
Starmer’s government, which took office in July, introduced new tax hikes for businesses, raising concerns, especially in the manufacturing sector, that continues to decline amid fears of impending tax increases.
Bank of England’s Predictions
The Bank of England predicts no growth in the last quarter of 2024 but has maintained current interest rates due to inflation concerns.
Future Fiscal Stimulus
UBS analysts are optimistic that the recent economic downturn will not continue, citing the potential for fiscal stimulus from public spending plans in Starmer’s recent budget, which could contribute an estimated 0.5% to GDP in the upcoming year according to Office for Budget Responsibility forecasts.
Public Finance Concerns
Despite these promising factors, the first budget from Starmer’s Labour government exposes the precarious state of the UK’s public finances. Increased spending, combined with only a partial offset from higher taxes, raises concerns. Analysts expressed uncertainty about how the government will address these challenges, noting that few options appear appealing.
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