Report: UK Economic Growth Faces Two-Year Delay

By Staff, Agencies

The UK's economic growth could be "postponed" for up to two years due to a combination of persistent challenges, including high inflation and the fallout from Donald Trump's trade war, according to the latest forecast from the EY ITEM Club.

The economic forecaster has downgraded its expectations for output in 2025 and 2026, citing weak sentiment among both households and businesses as the main concern.

The report highlights that the UK's trade relationship with the US is a significant factor, with a "baseline" 10% tariff imposed on imports from most countries and a 25% duty on UK-produced steel, aluminum and cars.

With 16% of UK exports typically heading to the US, the forecast anticipates weaker demand for these goods, further dampening growth prospects.

EY ITEM Club now forecasts UK growth of 0.8% this year, down from the previously expected 1%, and 0.9% in 2026, a downgrade of 0.6 percentage points.

This outlook is even lower than the International Monetary Fund's recent downgrades, creating pressure on the government, which has made securing economic growth a top priority.

The report also notes the impact of recent tax increases on businesses, which took effect earlier this month, and the ongoing strain on households from rising bills, including energy, water and council tax.

These factors, combined with declining consumer confidence and a rise in financial distress among businesses, are expected to further restrict spending and economic activity.