UBS cuts UK GDP forecasts for 2024/2025

Investing.com – The UK economic system returned to development in November, however the smaller-than-expected enlargement has prompted UBS to chop its GDP forecasts for 2024 and 2025.

UK gross home product rose by 0.1% from October, based on official knowledge, after falls in September and October. Nonetheless, many economists had largely forecast a 0.2% rise.

This knowledge integrated the primary month after Chancellor Rachel Reeves introduced massive tax will increase for companies in her first funds.

Ben Jones, lead economist on the Confederation of British Business, mentioned a temper of warning had settled over UK companies since then.

“Many corporations are coming into 2025 with a concentrate on lowering operational expenditure, which is more likely to weigh on pay, hiring and funding within the months forward,” Jones mentioned. 

Regardless of a pick-up in month-to-month GDP development in November, UBS calculates that the typical of October and November GDP (assuming unchanged output in December) could be in step with a slight GDP contraction of 0.1% q/q in This fall-24. 

On the sector degree, much like the earlier quarter, the economic sector seems to be the important thing drag on development, greater than offsetting a small optimistic contribution from the development sector and a flat contribution from providers.

As a consequence, UBS lower its UK GDP development forecasts by 0.1 proportion factors to 0.8% for 2024 and by 0.4pp to 1.1% for 2025. 

“The downgrade is pushed by two elements: first, the downward revision to Q3 GDP (from +0.1% q/q to 0% q/q); second, slower-than-expected development in This fall with at the moment’s GDP knowledge reinforcing weak indications from sentiment indicators,” analysts on the Swiss financial institution mentioned, in a word dated Jan. 16.  

“Consequently, we lower our This fall GDP estimate to 0% q/q (prev. +0.4% q/q) that additionally implies decrease statistical carry-over for 2025. The quarterly development trajectory past This fall-24 is unchanged, implying a brief bounce again at the beginning of 2025 (Q1 GDP +0.4% q/q), supported by the front-loaded fiscal spending introduced on the Autumn Price range.”