UK development outlook downgraded by main financial forecasters in newest blow to Chancellor Rachel Reeves

The UK financial system is forecast to enhance extra slowly than beforehand predicted after stagnant development late final yr.

The EY ITEM Membership expects UK gross home product (GDP) to develop by 1% in 2025, down from a earlier estimate of 1.5%.

The financial forecaster is the most recent influential group to chop its predictions amid continued strain on companies, which face additional tax and wage rises in April.

It represents one other blow to Chancellor Rachel Reeves’ hopes of quickly rising the financial system.

It comes after a weaker second half of 2024, with a worse-than-expected 0.1% rise in GDP in November and a 0.1% month-to-month decline in October.

The financial system had flatlined over the third quarter of the yr.

However the UK is anticipated to see stronger development subsequent yr, with the forecasts indicating it may see a 1.6% rise in 2026.

Anna Anthony, EY UK regional managing companion, stated: “Regardless of the subdued end to 2024, there are indicators that the UK financial system may flip a nook and obtain stronger ranges of development this yr.

“Following a chronic interval of monetary uncertainty, we should always begin to see an enchancment in client confidence as actual wages proceed to extend, with many households feeling much less of a monetary squeeze by the tip of 2025.”

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She added: “The outlook for UK enterprise is extra of a combined image.

“Whereas enterprise funding is about to extend, tightening monetary situations and international commerce uncertainty are anticipated to weigh on non-public sector confidence within the first half of this yr.”