The British Chambers of Commerce Quarterly Economic Forecast has revised down growth expectations for 2024, but marginally improved GDP expectations for 2025 and 2026.
Increased government spending is likely to boost GDP, but business investment and trade are likely to suffer this year through the impact of the national insurance rise and major global uncertainties.
David Bharier, Head of Research at the British Chambers of Commerce, said: “Our forecast expects the national insurance hike, alongside other growing cost pressures on business, to impact on several economic indicators over the coming months.
“GDP is expected to pick up slightly next year, but that’s likely to be down to more government spending. Our research continues to show that most SMEs are not increasing investment, amidst an array of rising costs and admin burdens.
“The knock-on effect of rising business costs are likely to restrict wage growth in the short term and employment, as firms struggle to pass on costs and boost recruitment. With fears of a tariff war and continued trade barriers with the EU, international trade will be challenging for many firms.
“Our surveys already showed a fall in business confidence before October’s Budget. While the full impact of the Chancellor’s statement is yet to be seen, businesses face tough decisions as bills rise. It’s vital that business rate reform is accelerated and much anticipated strategies on industry, infrastructure and trade deliver at pace in the months to come.”
The QEF, winner of the 2024 FocusEconomics award for best GDP forecast, expects the UK economy to grow by 0.8% in 2024, a downgrade from the previous forecast (1.1%). Growth has been revised upwards for the next two years – with 1.3% expected in 2025 and 1.5% in 2026, higher than previous forecast (1.0% and 1.1%). Upgrades to 2025 and 2026 are driven by increased levels of government spending, but the overall growth landscape remains relatively weak.
The rise in employer national insurance contributions, announced at the Budget, has had a small impact on the forecast – including average earnings and unemployment.
Inflation is now expected to remain above the Bank of England’s target until the end of 2026, due to increased business costs and global trade uncertainties. CPI is forecast to be 2.2% in Q4 2025, unchanged from the previous forecast, and 2% in Q4 2026, slightly higher than the last forecast.
As businesses face tough decisions on costs, unemployment has been revised upwards to be 4.5% by the end of 2025 before falling to 4.2% in 2026 (previously 4.4% in 2025 and 4.1% in 2026).
