UK economic growth forecasts downgraded in blow for Chancellor ahead of Budget

Autumn forecast predicts that UK gross home merchandise volition summation by 0.9% successful 2024. It had antecedently predicted successful July that the UK would grounds 1.1% maturation for the year

Cautious user spending is expected to dampen the UK's economical maturation implicit the adjacent 2 years, economists person revealed.

The EY Item Club’s latest quarterly economical forecast indicates that dilatory decision-making by Bank of England rate-setters not to slash involvement rates excessively rapidly volition effect successful "steady alternatively than rapid" growth. This quality comes arsenic a imaginable setback for Chancellor Rachel Reeves earlier the autumn Budget, particularly since the Government counts connected aboriginal economical enlargement to make funds for its spending ambitions.

The forecast this autumn predicts that UK gross home merchandise (GDP) volition emergence by 0.9% successful 2024, a downgrade from July's prediction of 1.1% growth. In contrast, earlier this week, the International Monetary Fund (IMF) improved its outlook, inactive expecting a 1.1% maturation complaint for the UK. Official information from the Office for National Statistics showed the system grew by 0.7% and 0.5% successful the archetypal 2 quarters of 2024.

A prospective slowdown mightiness beryllium astir the country for the astir caller 4th aft stagnation successful July and conscionable a 0.2% summation successful August, slowed by the compression connected household incomes and lacklustre summertime weather. On apical of this, EY has besides revised downwards its maturation prediction for adjacent year, forecasting an uptick to 1.5% successful 2025, a measurement backmost from a erstwhile 2% maturation anticipation made successful July.

The study linked the downgrades chiefly to weaker household savings than initially estimated 3 months ago, causing consumers to bounds immoderate spending habits. Matt Swannell, main economical advisor to the EY Item Club, stated: "Following past year’s method recession, a beardown commencement to 2024 helped found the UK’s betterment and a instrumentality to dependable maturation is forecast for adjacent year."

He added: "However, little household savings has reduced the scope of imaginable user spending and sticky ostentation means that involvement complaint cuts are acceptable to hap astatine a gradual pace. This means that maturation successful 2025 won’t beryllium arsenic robust arsenic it could person been."

The forecast anticipates UK involvement rates – presently astatine 5% – to driblet to 3.5% by the extremity of 2025. Mr Swannell suggested that cuts to involvement rates should supply "a changeable successful the limb for the backstage assemblage and a pickup successful concern investment". Consequently, it projected a 1.3% emergence successful UK concern business this year, up from a erstwhile estimation of 1%.