UK economic growth will bounce back slower than previously anticipated this year after a stagnant end to 2024.
The EY Item Club has become the latest to axe projections for the economy over 2025 as the likes of muted consumer confidence and looming tax hikes for businesses weigh.
According to the group, gross domestic product (GDP) was set to grow by 1.0% this year, against 1.5% as previously forecast.
GDP had flatlined towards the back end of last year, with a surprise 0.1% contraction in October being followed by a slower-than-anticipated 0.1% uptick over November.
“Despite the subdued finish to 2024, there are signs that the UK economy could turn a corner and achieve stronger levels of growth this year,” EY’s Anna Anthony noted.
“Following a prolonged period of financial uncertainty, we should start to see an improvement in consumer confidence as real wages continue to increase.”
However, the outlook for UK businesses was “more of a mixed picture,” Anthony warned.
“While business investment is set to increase, tightening financial conditions and global trade uncertainty are expected to weigh on private sector confidence in the first half of this year.”
Inflation was also on course to average 2.8% in 2025, above the 2.0% target, in part due to employer national insurance hikes from April, EY said.