UK Economy in 2025: A Cautionary Tale of Headwinds
Wake‑up call – The Confederation of British Industry (CBI) just issued its hottest forecast yet: the UK’s GDP will grow at a slow 1.2% this year – a sharp cut from the 1.6% predicted in December.
What’s Slowing Things Down?
- Higher wages – The Autumn Budget raised employment costs, making firms think twice before hiring or raising prices.
- Cold shoulders from the US – Tariffs are chopping at exports and dampening the appetite for investment.
- Sluggish demand – Even with a strong start to 2025, consumer and business sentiment remains gloomy.
2026 Looks a Mile Better – But Still Tiring
Expect a modest lift to 1.0% growth in 2026, thanks to:
- Household spending climbing with real incomes rising.
- Interest rates easing.
- Inflation calming down.
Yet, higher labour costs and global uncertainty will keep business investment humming at a low volume.
CBI’s Takeaway
Louise Hellem, Chief Economist says:
“The forecast pinpoints the challenges at hand: rising costs, low confidence, and muted investment. It’s a sign that the government must pull every lever to get the UK back on a growth track.”
“The Spending Review spotlights a hard‑wiring of growth into policy – targeted investment that raises the economy’s ceiling. But the real catalyst will come from the market, not from Whitehall.”
“A rich, joined‑up people strategy is missing. We need skills, labor, and tech adoption all in harmony to light the spark.”
What You Can Do
- Stay informed with real‑time updates.
- Follow the Industrial Strategy – it’s the next big opportunity to boost growth.
- Support initiatives tackling high energy costs and tech adoption.
In short, the UK is feeling the heat from both home and abroad, but with the right moves from business and government, a brighter road ahead isn’t far off.
