Economic growth in the United Kingdom is projected to decelerate to 1.1%.
This forecast has prompted leading economists and analysts, including those at the prominent audit and advisory firm Blick Rothenberg, to advocate that the Government’s forthcoming economic strategy prioritises expansion and growth.
They warn that any measures that could jeopardise this growth, such as increased taxation, should be avoided.
Tom Goddard, an assistant manager at Blick Rothenberg, emphasised the importance of the economic plan that Chancellor Rachel Reeves is scheduled to present later this month.
He cautioned that the new strategy must learn from last year’s Autumn Budget, which he criticised for implementing substantial tax increases that ultimately stifled economic growth.
The recent revision of the UK’s growth outlook down to 1.1% represents a decline from an earlier forecast of 1.4% made during the Autumn Budget.
Goddard explained that while a gradual improvement in growth rates is anticipated over the remainder of the decade, these projections indicate that the country’s economic performance will still fall short of its full potential.
Goddard highlighted the Chancellor’s focus on innovation through artificial intelligence and on strengthening trade relationships with the European Union as crucial components of the Government’s overarching economic strategy. Nonetheless, he pointed out that rising unemployment, particularly among youth, requires immediate and comprehensive attention. Currently, around 1 million young people are classified as not in education, employment, or training (NEET), indicating a significant concern for the future workforce and the overall economy.
In the context of the recent Spring Statement, Goddard noted that it primarily reiterated conclusions drawn by the Office for Budget Responsibility. Key points of focus included the ongoing decline in inflation and the reduction in government debt compared to previous years. However, he raised alarms over external factors that could undermine this perception of stability, notably global instability exemplified by the escalating crisis in the Middle East. He noted significant volatility in gilt markets (government bonds) and suggested that the anticipated timeline for interest rate cuts in 2026 may need reassessment amid shifting economic conditions.
Furthermore, Goddard expressed his concerns regarding the concept of fiscal headroom. He pointed out that although the Chancellor reported an increase in fiscal headroom from £21.7 billion to £23.6 billion, this buffer could be significantly weakened if the ongoing conflict leads to higher borrowing costs. He also warned that inflation forecasts—projected to align with the Bank of England’s 2% target by the end of the decade—may need to be adjusted if energy prices continue to rise, further complicating the economic landscape for policymakers.
