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UK Economic Outlook: Subdued Growth and Persistent Challenges

Strategic Insights

— 2 min read

The latest British Chambers of Commerce (BCC) economic forecast has upgraded growth expectations for 2025, but overall, the outlook remains subdued. The forecast shows that GDP growth in 2025 has been revised up to 1.3%, while business investment is expected to grow by only 1.6% this year and will remain subdued across 2026, rising only by 1.9%. The inflation rate is forecast to hit 3.7% in Q4 2025, before easing to 2.5% by the end of 2026. The interest rate is expected to remain at 4% for the rest of 2025 and fall to 3.5% by the end of 2026.

Key Takeaways:

  • The UK economy is expected to grow by 1.3% in 2025, revised up from the previous forecast of 1.1%.
  • Business investment across 2025 is projected to be 1.6%, a significant downgrade from 4.8% in the last forecast.
  • Construction is expected to be the best-performing sector this year, growing by 1.5%, revised up from 0.8%. Services are forecast to grow by 1.3%, and manufacturing by 1%.
  • Average earnings are expected to remain significantly above inflation this year, reaching 4.3% by the end of Q4.
  • The unemployment rate is expected to remain broadly unchanged at 4.7% this year compared with 4.6% in the Q2 forecast.
  • The forecast suggests a net trade deficit will continue to weigh on growth going forward, with a contraction of -1.3% in 2025, -0.7% in 2026, and -0.9% in 2027.

Statistics:

  • Growth in GDP is expected to be 1.3% in 2025, 1.2% in 2026, and 1.5% in 2027.
  • Business investment is projected to grow by 1.6% in 2025, 1.9% in 2026, and 3% in 2027.
  • The inflation rate is forecast to be 3.7% in Q4 2025, 2.5% by the end of 2026, and 2.1% in Q4 2027.
  • The interest rate is expected to remain at 4% for the rest of 2025 and fall to 3.5% by the end of 2026.
  • Average earnings are expected to be 4.3% by the end of Q4 2025, 4.1% in 2026, and 4% in 2027.
  • The unemployment rate is expected to be 4.7% in 2025, 4.7% in 2026, and 4.5% in 2027.

Sources:

  • British Chambers of Commerce (BCC) economic forecast
  • David Bharier, Head of Research at the British Chambers of Commerce
  • Vicky Pryce, Chair of the BCC Economic Advisory Council

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