Increased government spending is likely to boost GDP. However business investment and trade are likely to suffer next year due to the impact of the national insurance rise and major global uncertainties.
The British Chambers of Commerce’s quarterly forecast has revised down growth expectations for the UK for 2024 to 0.8 per cent from 1.1 per cent earlier, but marginally improved GDP expectations for 2025 to 1.3 per cent from 1 per cent earlier and for 2026 to 1.5 per cent from 1.1 per cent earlier.
Inflation is now expected to remain above the Bank of England’s target until the end of 2026.
Upgrades to 2025 and 2026 are driven by increased levels of government spending, but the overall growth landscape remains relatively weak.
Inflation is now expected to remain above the Bank of England’s target until the end of 2026, due to increased business costs and global trade uncertainties, BCC said in a release.
The consumer price index (CPI) is forecast to be 2.2 per cent in the fourth quarter (Q4) next year, unchanged from the previous forecast, and 2 per cent in Q4 2026, slightly higher than the last forecast.
As businesses face tough decisions on costs, unemployment has been revised upwards to be 4.5 per cent by the end of 2025 before falling to 4.2 per cent in 2026 (previously 4.4 per cent in 2025 and 4.1 per cent in 2026).
Business investment will continue to struggle throughout the forecast period, exacerbated by the upcoming rise in employer national insurance contributions. It is expected to increase by 1.5 per cent in 2024, but then grow only 0.9 per cent in 2025, recovering to 2.1 per cent by the end of 2026.
That’s a revision down for 2025 compared with the previous forecast of 1.4 per cent, as firms will face a number of increasing costs next year.
UK manufacturing production is expected to grow by 0.6 per cent in 2025 and 1.2 per cent in 2026.
The outlook for UK trade is expected to remain challenging due to trade barriers with the European Union (EU), global conflicts and the threat of tariffs.
Imports are expected to contract by 0.2 per cent in 2025 and grow by just 0.9 per cent in 2026, BCC said. Exports are forecast to grow by 0.2 per cent in 2025 rising to 1.1 per cent by the end of 2026.
But net trade continues to contract with figures of minus 1.5 per cent in 2024, minus 1.4 per cent in 2025 and minus 1.5 per cent in 2026. This a downward revision across the period on BCC’s last forecast.
The average unemployment rate is expected to be 4.5 per cent by the end of 2025, falling to 4.2 per cent in 2026. That is a slight increase from last quarter’s forecast as businesses are likely to face difficult decisions on recruitment going forward due to increased employment costs.
Youth unemployment will remain stubbornly high, with the percentage out of work forecast to be 14.9 per cent in 2025 before falling to 14.6 per cent in 2026.
Fibre2Fashion News Desk (DS)