UK growth outlook downgraded by leading economic forecasters in latest blow to Chancellor Rachel Reeves | Money News

The UK economy is forecast to improve more slowly than previously predicted after stagnant growth late last year.

The EY ITEM Club expects UK gross domestic product (GDP) to grow by 1% in 2025, down from a previous estimate of 1.5%.

The economic forecaster is the latest influential group to cut its predictions amid continued pressure on businesses, which face further tax and wage rises in April.

It represents another blow to Chancellor Rachel Reeves’ hopes of rapidly growing the economy.

The forecasts also point to 0.8% growth across the economy last year, suggesting only a slight acceleration in economic growth.

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% monthly decline in October.

The economy had flatlined over the third quarter of the year.

But the UK is expected to see stronger growth next year, with the forecasts indicating it could see a 1.6% rise in 2026.

Anna Anthony, EY UK regional managing partner, said: “Despite the subdued finish to 2024, there are signs that the UK economy could turn a corner and achieve stronger levels of growth this year.

“Following a prolonged period of financial uncertainty, we should start to see an improvement in consumer confidence as real wages continue to increase, with many households feeling less of a financial squeeze by the end of 2025.”

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She added: “The outlook for UK business is more of a mixed picture.

“While business investment is set to increase, tightening financial conditions and global trade uncertainty are expected to weigh on private sector confidence in the first half of this year.”