Economy

UK Economic Growth Forecast Upgraded as Optimism Rises

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The UK economy is set to grow faster than previously expected, according to the latest forecasts from the British Chambers of Commerce (BCC).

The business and industry lobby group now predicts the economy will expand by 0.8% this year, up from an earlier estimate of 0.5%. For 2025, the growth forecast has been revised upwards to 1%, compared to a previous projection of 0.7%.

This positive adjustment follows stronger-than-anticipated performance at the start of the year, with the UK registering its fastest quarter of output growth since 2022 at 0.6%. Although the UK economy briefly entered a technical recession at the end of 2023, it is now on a path to modest recovery. The BCC noted that while long-term growth prospects remain tempered, the current indicators show there is potential for economic momentum if properly supported.

“There is life in the UK economy but if it is to gain momentum then it must be nurtured,” said Vicky Pryce, chair of the BCC’s economic advisory council. She emphasized the need for sustainable, long-term economic plans from politicians, particularly with the impending general election on July 4. “Businesses will be watching for politicians to show they have sustainable long-term economic plans. These must play to the UK’s strengths and give companies confidence,” Pryce added.

Despite the improved forecasts for 2024 and 2025, the BCC has maintained its growth forecast for 2026 at 1%. The organization warned that the underlying momentum of the economy is expected to slow over the next two years after a strong start to 2024. The forecast predicts second-quarter growth at 0.4%, with subsequent quarters slowing to 0.3% and 0.2%.

Additionally, the BCC expects inflation to hit the Bank of England’s 2% target next year but anticipates it will rise slightly to average 2.2% by the end of 2026. The outlook for interest rates suggests they are likely to decrease in the second half of the year, which could further influence economic conditions and business confidence.

Overall, the upgraded forecasts from the BCC reflect cautious optimism about the UK’s economic prospects, emphasizing the importance of supportive policies and strategic planning to sustain and build on the recovery.

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