Forecasters have warned the British economy is moving closer to crisis point as growth forecasts have been cut again for 2025 and 2026, in another blow for the Chancellor Rachel Reeves.
Political uncertainty is also causing concern for economic recovery as the US President’s tariffs war is hampering investment and spending, the EY Item Club has warned.
The economic forecasters have as a result downgraded GDP growth for 2025 to 0.8% down from 1% and for 2026 EY has cut this from 1.6% to just 0.9% and in 2027 growth is predicted to rise to 1.5%, but a lot can happen in over the next two years.
Ipsos Mori Poll warned that confidence in the UK’s economy has hit rock bottom to the lowest level on record.
Donald Trump’s 10% tariffs on all imports and 25% on the automotive sector is causing an impact not just for the UK but also other countries globally.
The International Monetary Fund (IMF) last week downgraded their growth forecast to 1.1% for 2025 down from 1.6% that was predicted in January.
Households remain “cautious” over large spending such as house extensions amid the current cost-of-living crisis and businesses are limiting investment and expenditure over the coming two years amid the global markets.
Anna Anthony, regional managing partner for EY UK & Ireland, said, “There had been signs that the economy was exceeding expectations in the opening months of 2025, but a combination of global trade disruption, uncertainty, and persistent inflation look likely to postpone the UK’s return to more moderate levels of growth.
She added: “Businesses thrive on certainty, so it’s unsurprising that an unpredictable global market is translating into lower levels of business investment over the short term.” Despite the challenges, Anthony noted some grounds for optimism.
She said: “The services-led UK economy is projected to see continued growth this year and gradual interest rate cuts should slowly bolster business and household spending.
Over time, the unpredictable global landscape may offer opportunities for the UK to position itself as a stable, attractive destination for investment.
