The EY ITEM Club has downgraded its UK economic growth projections for 2025, citing ongoing pressure on businesses facing tax and wage hikes. The forecast predicts a slower recovery than previously anticipated, with a 1% growth rate, down from 1.5%.
The UK economy is forecast to improve more slowly than previously predicted, following stagnant growth late last year. The EY ITEM Club expects UK gross domestic product (GDP) to grow by 1% in 2025, down from an earlier estimate of 1.5%. This economic forecaster is the latest influential group to revise its predictions downward amid continued pressure on businesses, which face further tax and wage increases in April.
This represents another setback to Chancellor Rachel Reeves' ambitions for rapid economic growth. The forecasts also indicate 0.8% growth across the economy last year, suggesting only a slight acceleration in economic expansion. This follows a weaker second half of 2024, with a worse-than-expected 0.1% rise in GDP in November and a 0.1% monthly decline in October. The economy had remained essentially flat during the third quarter of the year. However, the UK is anticipated to experience stronger growth next year, with forecasts suggesting a potential 1.6% rise in 2026. Anna Anthony, EY UK regional managing partner, stated: 'Despite the subdued close to 2024, there are indications that the UK economy could be turning a corner and achieving stronger levels of growth this year. Following an extended period of financial uncertainty, we should start to witness an improvement in consumer confidence as real wages continue to increase, with many households feeling less financial strain by the end of 2025.' Anthony further added: 'The outlook for UK businesses is more mixed. While business investment is projected to rise, tightening financial conditions and global trade uncertainty are likely to dampen private sector confidence during the first half of this year.
ECONOMY UK GROWTH FORECASTS BUSINESSES TAXES WAGES
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