UK growth outlook slashed amid tax and trade ‘double whammy’
The Chancellor’s growth agenda was dealt a fresh blow on Thursday after the British Chambers of Commerce slashed its forecast for the UK economy due to the tax and trade “double whammy” afflicting UK businesses.
The business group now expects the UK economy to grow by just 0.9 per cent in 2025, a hefty downgrade on the 1.3 per cent growth it envisaged for the economy at the turn of the year.
British Chambers of Commerce (BCC) economists said the “raft of rising cost pressures” plaguing UK firms – including the the upcoming hikes to national insurance contributions and the minimum wage – will squeeze bottom lines, leaving bosses unable to invest and grow their businesses.
The BCC revised down its 2025 business investment estimates from 0.9 per cent to 0.6 per cent amid these cost pressure fears, though the figure is expected to rebound to 1.8 per cent the following year.
Meanwhile a separate survey on Wednesday found that last month service sector firms cut jobs at their fastest pace since the pandemic, as they braced for the tax and wage changes announced in the Budget.
The closely-watched S&P Composite Purchasing Managers’ Index (PMI) employment gauge sank to 43.9 from 45.1, its lowest level since November 2020 and – excluding the pandemic – a post-financial crash nadir.
Vicky Price, chair of the BCC Economic Advisory Council, said firms should expect 2025 to be a “challenging year”, and that the forecast showed “an economy struggling without the secure foundations to kickstart business investment.
“Businesses can’t simply rely on the promise of long-term strategies from government,” she added, “they need support now to invest, recruit and trade.”
The survey will heap further pressure on the Chancellor. Yesterday, she was reported to have earmarked a suite of spending cuts for upcoming spring statement that will help her keep within her fiscal rules while also reaching the government’s new defence spending targets.
The BCC attributed some of its growth downgrade to the trade war that looks set to engulf the global economy, with its head of research David Bharier branding its timing a “double whammy” on businesses while they also battle rising costs domestically. The group said the barriers to trade would weigh on UK exports even if the country avoids the worst of the sweeping tariffs being applied to trade to and from the US, and slashed its export forecast from 0.9 per cent to just 0.5 per cent,
A Treasury spokesman said: “We delivered a once-in-a-Parliament budget to wipe the slate clean and give businesses the stability they need to invest.
“This government is focused on going further and faster to kickstart economic growth so working people have more money in their pockets through our plan for change, and many business leaders are confident that the Chancellor’s growth plans will help drive business investment – both the IMF and OECD forecast that the UK will have the fastest economic growth in the European G7 countries.
“But we also know that for millions of people the cost-of-living crisis is not over. That is why we protected payslips from higher taxes, gave a pay rise to 3 million workers next year and kept prices down at the pumps by freezing fuel duty, saving drivers £3 billion next year alone.”