UK economy to expand until 2025 end, but growth to be sluggish: BCC

The BCC’s quarterly economic forecast predicts the United Kingdom will remain in the slow lane.

The UK economy looks set to continue expanding until the end of 2025, but growth will remain quite sluggish.

A growth rate of 0.6 per cent is now expected for the whole of this year, dropping to 0.4 per cent in 2024, and nudging up only slightly to 0.6 per cent in 2025.

Prolonged high interest rates, trade barriers, particularly with the European Union (EU), and limits on consumer spending are all seen to feed into a low growth climate. 

Trade is also likely to continue to suffer, with export growth of just 0.5 per cent and 1.2 per cent in the next two years, following a contraction of 0.5 per cent this year. Imports are similarly lacklusture, with further regulatory changes at the UK and EU borders weighing on trade flows.?

Despite core inflation now outpacing the headline consumer price inflation (CPI) rate, BCC research indicates the proportion of firms expecting their prices to rise is continuing to fall.

The forecast for the CPI rate is now 4.6 per cent in the fourth quarter (Q4) 2023, 3.1 per cent in Q4 2024 and 1.9 per cent in Q4 2025, when it finally slips below the Bank of England’s 2-per cent target.?

While this year’s beginning turned out better than expected, the second half has been lacklusture, leading to overall growth of 0.6 per cent for the year. 

And with interest rates now predicted to fall only slightly in 2024 and business confidence failing to take off, BCC expects the economy to grow by just 0.4 per cent in 2024 and 0.6 per cent in 2025.???

This is a slight increase for 2024 and a similar decrease for 2025, from the BCC’s previous Q3 forecast of 0.3 per cent and 0.7 per cent respectively.

Weak levels of growth in household consumption and a forecast of a reduction in overall real terms Government spending in 2023 and 2024, are also factors in this shaky performance, BCC said in a release.

BCC, therefore, expects business investment to contract by 0.8 per cent in 2024, before rebounding to 1.2 per cent in 2025.

While the number of vacancies continues to decline and demand remains subdued, the unemployment rate is also expected to stay higher for longer, hitting 4.8 per cent by the end of 2025.

Fibre2Fashion News Desk (DS)