UK economy forecast to grow 1.4% in 2025, beating most of Europe

Britain is expected to see its economy expand by 1.4% this year, surpassing major European countries but falling behind the government’s promise to lead growth among wealthy nations.

The British economy will do better in 2025 than initially anticipated, according to new statistics from Bloomberg Economics, with November’s results showing more momentum towards the end of the year. The anticipated 1.4% growth rate would be the nation’s best economic performance since 2022, when the country recovered from lockdowns brought on by the virus.

Britain secures third place among wealthy nations

Upon assuming office in 2024, Prime Minister Keir Starmer pledged to propel Britain’s economic development to the top of the Group of Seven countries. The nation has suffered from slow growth, which has reduced household earnings and made budget planning difficult for the government.

If Britain hits the 1.4% growth forecast, it would rank third among G-7 countries, trailing only the United States and Canada. This comes as Germany, the largest economy in Europe, managed just 0.2% growth last year, according to recent data. Britain appears likely to hold onto that third-place position through this year as well.

The country now looks set to show modest growth in the final three months of the year, rather than the flat performance predicted by some analysts, including the Bank of England. Still, this won’t necessarily ease concerns within the Labour government about economic conditions, particularly given weak job market numbers and cautious consumer spending.

After a solid start to 2025, growth tapered off in the latter half of the year. Economists polled by Bloomberg predict the expansion will slow further to 1.1% in 2026. These numbers remain below the growth levels Britain saw throughout most of the 2010s.

Consumer spending holds key to future growth

Bloomberg Economics experts Ana Andrade and Dan Hanson emphasized the main economic uncertainties. “The key question is whether consumers are now more willing to spend,” they stated. Through the remainder of 2026, the duo anticipates quarterly growth of about 0.3%; however, they cautioned that this forecast may prove “too optimistic, particularly in the context of a cooling labor market.”

The 0.3% GDP growth in November was more than predicted. But a large portion of the expansion resulted from industrial output recovering after Jaguar Land Rover’s operations were interrupted by a hack.

These latest numbers leave questions about how strong the economy really is underneath. The boost from the Jaguar Land Rover situation will likely fade, and the impact of Chancellor Rachel Reeves’ budget remains unclear. Her budget package raised taxes by £26 billion.

Kallum Pickering, chief economist at Peel Hunt, offered his assessment of the situation. “While momentum clearly weakened in the second half of the year as households and businesses turned cautious amid worries over further tax increases, economic activity seems to have been less soft than surveys and anecdotes from businesses had indicated,” he said.

The government now faces the challenge of maintaining growth momentum while dealing with a cautious consumer base and a softening labor market.

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