UK unlikely to move into ‘fast lane’ despite surprisingly strong growth this year
The British Chambers of Commerce (BCC) has lifted its growth forecasts for the economy this year, but remained doubtful that the UK would move into the “fast lane” any time soon.
The business group’s latest quarterly projections suggest the UK will grow 1.1 per cent this year, an upgrade on its previous estimate of 0.8 per cent.
The upgrade largely reflects stronger-than-expected growth over the first half of the year, when the UK was the fastest growing economy in the G7.
The economy is expected to grow 0.4 per cent in the third quarter before slowing to 0.2 per cent in the fourth quarter.
The BCC noted government spending was the “main driver” of growth this year.
Looking into next year, the BCC expects household consumption to “increase significantly” thanks to lower inflation and further rate cuts.
Even so, growth will remain broadly unchanged. The BCC expects annual growth of 1 per cent in 2025 and 1.1 per cent in 2026.
“While the UK economy will perform better this year, it’s unlikely to be heading into the fast lane any time soon,” Vicky Pryce, chair of the BCC Economic Advisory Council, said.
Government’s ‘downbeat’ assessment ‘a concern’
Pryce suggested firms would “struggle to invest” due to political and economic uncertainty, both in the UK and around the world.
She suggested that the government’s “downbeat” assessment of the fiscal position was a concern for businesses approaching the Budget, particularly if it leads to a suite of tax rises.
“Businesses will be wanting the government to focus on measures that boost investment, support growth and maintain competitiveness,” Pryce said.
Speaking in parliament earlier this week, Chancellor Rachel Reeves promised to deliver a “tax roadmap” for business for the duration of the parliament.
The roadmap will include a commitment to cap corporation tax at 25 per cent and retain full expensing.
However, Reeves is rumoured to be considering a range of other tax rises which would impact businesses, most notably lifting capital gains tax.
Many business groups have warned that raising taxes would risk hampering Labour’s ambitious target of delivering the highest sustained growth in the G7.