UK Growth Forecast Slashed, Delivering a Blow to Starmer and Reeves

[Social Media]

 

The Office for Budget Responsibility (OBR) is set to halve the UK’s growth forecast for 2025, dealing a significant setback to Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves. The expected growth rate, initially projected at 2 percent, will now be downgraded to around 1 percent for the financial year spanning April 2025 to March 2026.

 

Reeves, who will present the Spring Statement next week, is expected to attribute the decline to global economic challenges, particularly the economic impact of Donald Trump's trade policies. However, the revision poses a political embarrassment for both Starmer and Reeves, who have repeatedly stated that economic growth is their top priority.

 

Critics have already pointed to Labour’s decision last October to implement £40 billion in tax increases—the largest tax hike in over thirty years—as a key factor in the UK’s weakening economic outlook. The increase in National Insurance for businesses has been widely blamed for slowing growth, with concerns mounting as Reeves prepares to announce significant spending cuts during her address to Parliament on Wednesday.

 

 

While government sources insist that no additional tax increases will be announced, new efforts to combat tax avoidance are expected to generate extra revenue. It has been confirmed that without the revenue-raising measures already introduced, Reeves would have breached her own fiscal rules.

 

In an attempt to explain the situation, Reeves is expected to argue that global conditions have shifted, citing Trump's return to office and rising global debt interest rates. However, this argument is undermined by surveys indicating that business confidence was already in decline before Trump took office. A British Chambers of Commerce study found that by early January, two-thirds of UK firms were already concerned about the growing tax burden.

 

Shadow Chancellor Mel Stride did not hold back in his criticism, stating: "Before the election, Labour promised ‘growth, growth, growth,’ but their anti-business Budget has killed growth stone dead. The Chancellor has relentlessly talked Britain down, raised taxes to record highs, and burdened businesses with extreme employment legislation. With just six days until Labour’s emergency Budget, the Chancellor must think again."

 

The worsening economic climate is expected to intensify debates within the government over the extent of spending cuts required. While the halved growth forecast aligns with projections from financial institutions, the precise figures remain closely guarded by the Treasury ahead of Wednesday’s announcement.

 

In the autumn, the OBR faced accusations of excessive optimism in its projections. The latest forecast will bring it more in line with estimates from the Bank of England, which recently revised its 2025 growth estimate from 1.5 percent to 0.75 percent. Other economic indicators continue to decline, with the Bank of England warning on Thursday that inflation could rise from 3 percent to 3.75 percent by the end of the year. The official inflation target remains at 2 percent, a level briefly achieved in the final months of the previous Conservative government after a concerted effort to bring inflation down from double digits.

 

The Bank of England’s decision to hold interest rates at 4.5 percent reflects concerns about declining business confidence, with more firms reportedly freezing hiring. Adding to the pressure, Reeves’ forthcoming increase in National Insurance for companies, expected to generate £25 billion, is set to take effect next month, sparking further backlash from the business community.

 

Despite the bleak outlook, the Chancellor is expected to introduce new measures aimed at stimulating growth. Following a two-week focus on spending cuts, including reductions in welfare and Whitehall waste, Reeves will unveil policies designed to improve productivity and economic performance. However, the Spring Statement will not include detailed spending allocations for individual government departments, with those decisions postponed until June.

 

Changes to overall Whitehall spending are anticipated. Reeves had previously announced a real-term increase of 1.5 percent in day-to-day departmental budgets, compared to the 1 percent rise planned by former Tory Chancellor Jeremy Hunt. However, much of her spending has been front-loaded, meaning the increase will taper off to 1.3 percent in the latter years of the decade. This figure is now expected to be revised downward. The Institute for Fiscal Studies has estimated that reducing the planned increase to 1.1 percent would save £5 billion annually.

 

The reductions will help Reeves meet her fiscal targets, which include balancing day-to-day spending with tax revenues and ensuring public debt declines over a five-year period. However, they are also likely to provoke criticism from left-wing Labour MPs and reignite debates over similarities between Reeves’ approach and the austerity measures introduced by former Chancellor George Osborne.

 

Treasury officials maintain that real-term public spending is still rising, arguing that their approach is not comparable to austerity. Last autumn, an additional £40 billion in public spending was announced. Nevertheless, economic analysts warn that the scale of cuts facing unprotected government departments in the coming years could be as severe as those imposed during the austerity era.

 

Based on a report by The Telegraph  2025-03-24

 

 

[Harrisfan]

A warning sign for Canada.

[Cryingdick]

The Uk has some energy assets and a few banks. I only own one stock from the UK and that is Arm which is chip designer. I really do not understand what keeps the UK afloat anymore. 

[Eloquent pilgrim]

 

Rachel from accounts 

 

 

[BangkokReady]

41 minutes ago, Cryingdick said:

I really do not understand what keeps the UK afloat anymore.

 

Diversity?

[Gsxrnz]

There are two Englands - Londinium being the financial capital of Europe and providing the tax base for all the social welfare recipients, and the Otherlands, being the devastated multi-cultural cities, towns, and villages of the provinces. Without Londinium, the rest of England would be a third world state.

 

Although with all the gold and silver being shipped across the pond from the BOE in recent months and following decades of political mismanagement, third world status may arrive sooner than later. 

[Mr Meeseeks]

16 minutes ago, Gsxrnz said:

There are two Englands - Londinium being the financial capital of Europe and providing the tax base for all the social welfare recipients, and the Otherlands, being the devastated multi-cultural cities, towns, and villages of the provinces. Without Londinium, the rest of England would be a third world state.

 

Although with all the gold and silver being shipped across the pond from the BOE in recent months and following decades of political mismanagement, third world status may arrive sooner than later. 

 

You forget about Scotland propping up the UK with its energy, water and multi-billion Pound whisky industry. 

 

When Scottish independence comes, England will be in serious trouble. 

[Eloquent pilgrim]

 

 

Well it hasn’t helped that she authorised for the ASLEF train drivers, a well above inflation, 5% backdated pay rise for 2022-23, a 4.75% rise for 2023-24, and a 4.5% increase for 2024-25.

 

It also hasn’t helped that the block on funding for the UN / Hamas affiliated agency UNRWA imposed by the previous government was reversed by David (race-card Lammy) so we are now giving another £34 million to an agency that held innocent Israeli hostages in their facilities in Gaza, and some of who’s members took part in the 7th October atrocities …. Broken Britain   ¯\_(ツ)_/¯

 

 

 

 

[Eloquent pilgrim]

1 hour ago, Mr Meeseeks said:

 

You forget about Scotland propping up the UK with its energy, water and multi-billion Pound whisky industry. 

 

When Scottish independence comes, England will be in serious trouble. 

 

It would seem you are unaware of the Barnett formula, which is a mechanism used by the UK Treasury for the block grant funding to Scotland. I suggest you research it.

 

And if Scotland ever achieved independence, they would soon be invaded by the Faroe Islands, and their trawlers, Fair isle sweaters, and bagpipes would be no match for the invaders.

 

   

[Mr Meeseeks]

37 minutes ago, Eloquent pilgrim said:

 

It would seem you are unaware of the Barnett formula, which is a mechanism used by the UK Treasury for the block grant funding to Scotland. I suggest you research it.

 

And if Scotland ever achieved independence, they would soon be invaded by the Faroe Islands, and their trawlers, Fair isle sweaters, and bagpipes would be no match for the invaders.

 

   

 

The only reason it is being subsidised to that degree is for government activities i.e. Scottish Parlliament and devolution and because Westminster takes a massive amount of what Scotland puts in.

 

Ironically, the formula you have chosen proves Scotland pays way more into Westminster than it actually receives.

 

Scottish taxpayers pay 8.8% of UK taxes while they represent only 8.2% of the population of the UK. 

 

Continue importing more benefit scrounging dinghy crossers and building mega-mosques in idilic areas, maybe you will wake up to the fact that England is cooked soon enough. 

[Snackbar]

The blind leading the blind

 

Ridiculous farce

[candide]

Not good, but still better than the two previous years...

https://www.statista.com/statistics/281734/gdp-growth-in-the-united-kingdom-uk/

[Cameroni]

6 hours ago, Cryingdick said:

The Uk has some energy assets and a few banks. I only own one stock from the UK and that is Arm which is chip designer. I really do not understand what keeps the UK afloat anymore. 

 

They are strong in pharmaceuticals, oil, financial services but looks like they are getting weaker. 

[Sir Dude]

As long as Starmer and his cabinet cling on to student union lefty fantasy politics/policies, then it will get worse... they are simply not business friendly. You don't "fix" the economy buy hiking taxes on everyone and businesses, then giving inflation-busting pay rises to the public sector without linking it to performance... you are just driving away the wealthy who pay most of the tax revenue for the Treasury anyhow, and businesses will just up and leave taking their jobs with them. It's basic business 101, lower the taxes, cut the waste, attract the wealthy and businesses who bring the jobs with them plus the innovation too... you get more money coming in with less taxes because the slice of the pie is bigger and confidence/sentiment is higher, so people and businesses spend, and you are also a good environment for SMEs that make up so much of any economy.

In a nutshell, Labour need to understand the word "realpolitik"... and fast.

[Watawattana]

9 hours ago, Cryingdick said:

I really do not understand what keeps the UK afloat anymore. 

I'd have thought this was obvious.  It's all the discarded inflatables that have brought "asylum seekers" across the Channel.

[JonnyF]

This is just the start.

 

Labour will destroy the economy like they always do. 

[Chomper Higgot]

There’s forecasts and there’s actual growth:

 

https://www.theguardian.com/business/2025/mar/24/uk-private-sector-growth-pmi-rachel-reeves-services-trump-tariffs

[JonnyF]

1 minute ago, Chomper Higgot said:

There’s forecasts and there’s actual growth:

 

https://www.theguardian.com/business/2025/mar/24/uk-private-sector-growth-pmi-rachel-reeves-services-trump-tariffs

 

https://www.bbc.com/news/articles/cly3mdlk70no

 

[James105]

18 minutes ago, Chomper Higgot said:

There’s forecasts and there’s actual growth:

 

https://www.theguardian.com/business/2025/mar/24/uk-private-sector-growth-pmi-rachel-reeves-services-trump-tariffs

 

The only growth Labour will achieve is growth in China where they are buying solar panels from and growth in carbon emissions due to importing them into the UK all the way from China. 

[Chomper Higgot]

33 minutes ago, James105 said:

 

The only growth Labour will achieve is growth in China where they are buying solar panels from and growth in carbon emissions due to importing them into the UK all the way from China. 

And yet you just responded to a post that included a link to a growth sector in the UK economy.

 

 

[James105]

30 minutes ago, Chomper Higgot said:

And yet you just responded to a post that included a link to a growth sector in the UK economy.

 

 

 

This is a single month.   Growth isn't based on a single month.   Next month the real anti-growth measures kick in when additional taxes kick in and the recession will follow shortly after.  

[Chomper Higgot]

2 minutes ago, James105 said:

 

This is a single month.   Growth isn't based on a single month.   Next month the real anti-growth measures kick in when additional taxes kick in and the recession will follow shortly after.  

Oh, so it’s you who has the forum’s crystal ball.