Restaurants and bars on James Street, London, England on Friday, December 13, 2024.
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According to preliminary estimates from the Office for National Statistics (ONS), the UK economy grew by 0.1% in the fourth quarter, surpassing expectations.
Reuters surveyed economists and expected the country’s GDP to shrink by 0.1% over the past three months.
The UK economy grew at zero in the third quarter, with monthly GDP data since then, shrinking to 0.1% in October, for 0.1% expansion in November.
Growing slowly Inflation has dropped recently Tip Bank of England last week To get the first rate reduction for the yearreducing its benchmark rate to 4.5%.
The central bank shows that further interest rates are coming as inflationary pressures ease, but notes that global energy costs and normative price changes in the third quarter of 2025 are expected to increase headline inflation to 3.7%, even if the basic Domestic inflationary pressure is expected to disappear further. BOE expects inflation rate By 2027.
The central bank also reduced its economic growth forecasts in the UK by 1.5% to 0.75% from this year’s forecast for economic growth.
Bad economic performance will put additional pressure on Prime Minister Rachel Reeves Financial Planannounced last fall, has been criticized for increasing the tax burden on British businesses. Critics say the plans increase the amount employers pay in National Insurance (NI) contributions (tax on income) and hiking to the national minimum wage, which could hurt investment, employment and growth.
Principal Reeves defended the “Autumn Budget”, saying it needed £40 billion in taxes to fund public spending and that she is prioritizing economic growth.
Growth declines in 2025
Economists generally expect the UK economy to end in a low-key manner and lower its growth forecast for 2025.
“Taxes on businesses are higher, lingering waste from previous rising interest rates and softer overseas demand explains why we revised our UK GDP growth forecast to 1.3% to 0.5% in 2025, from 2026 1.6% to 1.5% of the year,” said Paul Dales, chief economist at capital economics, in a report this week.
The city of London skyline landscape overlooks the Thames and Waterloo Bridge on sunset in London, England on February 10, 2024.
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Sanjay Raja, a senior economist at Deutsche Bank, agreed, saying the recent downgrade to the UK’s growth prospects for 2025 is “inevitable”.
“Any major revision, the negative impact from the fourth quarter of 2024 will automatically delay our 2025 growth forecast by 1.25%. How much downgrade can we look at? About 0.25 percentage points, at least, at least,” he said on Monday of the week. a research report said.
“There is more bad news. The start of the year of survey data has also not shown any rebound yet. Downside risks to our 2025 GDP growth forecast (0.3% quarter-quarter growth) Rising, the latest PMI Raja says:
“It is certain that trade uncertainty will continue for some time,” he added.
The threat of tariffs
U.S. President Donald Trump threatens to impose tariffs on EU and UK goods, but shows that Britain has established a more balanced trade relationship with the United States. Agreements can be reached to avoid taxation.
Britain certainly hopes to avoid Trump’s tariff anger, Reeves told CNBC last month The UK is “not part of the problem” When it comes to the “lasting” trade deficit the president wants to resolve.
U.S. President Donald Trump inspected a Guard of Honor at a welcome ceremony at Buckingham Palace in central London on June 3, 2019.
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Last week, the Bank of England said any potential U.S. tariffs on the UK could be inflation or dissolution in the UK, depending on the trade policies of other countries and the relative strength of different transmission channels. ”
“Most of these channels will take steps to reduce economic activity in the UK. However, some channels may reduce inflation in the UK, while others may drive it,” the central bank said.
BOE notes that, for example, a reduced U.S. demand for UK exports would be disbanded, but supply chain disruptions due to lack of components could lead to short-term price peaks.
