How much will the UK economy grow in 2025?

London: The UK economy is showing signs of recovery after a tough year. It dipped into a shallow recession last year, grappling with high inflation and rising interest rates.

At the start of 2024, many thought the UK would face another stagnant year. But surprisingly, the economy bounced back, growing by 0.7% in the first quarter. For a while, it was one of the fastest-growing economies in the G7.

However, that growth didn’t last. Recent figures show the economy contracted for two months in a row in October, and it’s been pretty stagnant since June. The risk of a recession is now a real concern, according to experts.

Despite the slowdown, the UK is still on track for a 0.8% growth this year. But what happened to that early momentum? There are a few reasons for this shift.

First, a slowdown was expected. The initial growth was a ‘catch-up’ after a weak 2023. Businesses and households were more confident at the start of the year, but that energy couldn’t last forever.

Next, interest rates played a big role. At the beginning of the year, many expected several rate cuts, but only two have happened. This change has affected economic activity, especially in sectors sensitive to interest rates.

Lastly, policy changes have also impacted confidence. With Labour now in power, there’s been a drop in consumer and corporate confidence, especially with warnings of a tough budget ahead.

Looking ahead, forecasters expect the UK to grow by 1.3% in 2025, which is a positive sign. The labor market remains strong, supporting wage growth even as inflation falls.

While there are uncertainties, especially with potential national insurance hikes and political changes, economists are still hopeful about the UK’s economic future.