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The Macroeconomic Outlook for the United Kingdom

Author

Listed:
  • Benjamin Caswell
  • Fergus Jimenez-England
  • Hailey Low
  • Stephen Millard
  • Max Mosley

Abstract

2024 was a year of two halves with strong GDP growth in the first half of the year giving way to stagnant GDP in the second half of the year. The most recent ONS data suggests that GDP grew by 0.7 per cent in the first quarter of 2024 and by 0.4 per cent in the second quarter, but then flatlined in the third quarter of 2024 with our January GDP Tracker (Low, 2025) suggesting zero growth in the fourth quarter of 2024 as well. That said, we do expect to see some growth – 0.3 per cent – in the first quarter of 2025. Against this backdrop of no growth in GDP, the Chancellor delivered her first budget, the first by a Labour Chancellor in 14 years. The budget was expansionary, with an extra £70 billion spending per year over the next five years only partially offset by an increase in taxes of £36 billion per year. As a result, we expect the economy to grow by 1.5 per cent in 2025 and the same in 2026. Against this positive news, the rise in employer National Insurance Contributions (NICs), as well as the rise in the National Minimum Wage (NMW) and National Living Wage (NLW), will likely lead to a slight rise in the unemployment rate.

Suggested Citation

  • Benjamin Caswell & Fergus Jimenez-England & Hailey Low & Stephen Millard & Max Mosley, 2025. "The Macroeconomic Outlook for the United Kingdom," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 17, pages 7-42.
    • Handle: RePEc:nsr:niesra:i:16:y:2024:p:7-42
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