UK GDP projected to rise 1.5% in 2025 & 2027, 1.6% in 2026: S&P Global

Its previous forecast was 1.3 per cent for 2025, 1.6 per cent for 2026 and 1.7 per cent for 2027.

Revisions to UK growth statistics since September are the main reason it lowered its growth forecast to 0.9 per cent for 2024 from 1 per cent earlier.

It now expects the Bank of England to cut its rate only four times over the next quarters to 3.75 per cent by the end of 2025 as a result of stronger jobs growth and inflation stemming from higher government spending.

These factors will likely dilute the economic impulse of the policy stimulus at a time when geopolitical risks and the potential for trade frictions have increased following the US elections, though the impact on the United Kingdom is minimal at this stage, S&P Global Ratings said in a release.

The UK economy lost some momentum toward the start of the fourth quarter (Q4) after a surprisingly strong first half this year. The ratings agency projects that public spending on consumption and investment could add 0.9 percentage points (pps) to GDP growth next year and 0.5 pps in 2026.

Most government stimulus will be offset not just by tax increases, but also by higher imports and a more restrictive monetary policy.

At the same time, the changing global environment suggests there could be some spillover from US trade policy and financing conditions to the United Kingdom. At this stage, however, these appear limited, it noted.

Fiscal loosening will boost GDP growth in the short term, but most of that growth will be offset by higher rates and imports. Overall, the public sector will take on a bigger share of UK economic activity, crowding out the private sector more than would otherwise have been the case.

S&P Global Ratings expects public spending to stay elevated by historical standards, and at levels only seen during the peak of the COVID-19 pandemic.

Fibre2Fashion News Desk (DS)