Britain’s economy is set to remain ‘stuck in low gear’ after the Budget failed to boost growth, according to a new forecast by one of Britain’s leading business groups.
The British Chambers of Commerce (BCC) predicts growth of 1.4 per cent this year – a slight improvement from 1.3 per cent in the previous forecast.
But it will be followed by further sluggish expansion of 1.2 per cent next year and 1.5 per cent in 2027, according to the group.
David Bharier, head of research at the BCC, said: ‘Our forecast suggests last month’s Budget is unlikely to be a growth game-changer for the UK economy.’
Mr Bharier said the outlook for small and medium sized firms would ‘continue to be challenging’ as business investment and export growth struggle, while labour and energy costs rise.
‘Taken together the forecast paints a picture of an economy remaining stuck in low gear,’ he added.
Gloomy outlook: The British Chambers of Commerce predicts growth of 1.4% this year – a slight improvement from 1.3% in the previous forecast
‘Businesses are showing remarkable resilience and innovation, but many are weighed down by political uncertainty and the cumulative cost pressures. The UK is trapped in a low growth cycle, with consequences for both the fiscal and political landscape.’
The BCC predicts that business investment will ‘suffer significantly’ next year, slowing from 3 per cent growth in 2025 to 0.9 per cent in 2026.
That is due to ongoing cost pressures on firms as well a ‘lack of direct growth measures in the Budget’. Export growth is also set to slow amid global trade uncertainty caused by tariffs.
And there is little sign of a fall in unemployment – currently at a four-year high of 5 per cent and expected to creep up to 5.1 per cent, according to the BCC,
Vicky Pryce, chair of the BCC’s economic advisory council, said: ‘Businesses will be steering through choppy waters once again next year after a Budget that lacked the growth measures so desperately needed.
‘Rising unemployment will be a key part of the economic landscape next year, pushing down consumer spending and presenting further challenges for firms of all sizes.’
The forecast adds to the gloom surrounding Labour’s latest Budget.
Speculation in the run-up to the event has already been blamed for delaying business investment, leaving growth and hiring on ice.
The Budget itself did little to revive the mood, with the Office for Budget Responsibility (OBR) warning that the Chancellor’s big tax increases would dent growth.
At the same time, the OBR judged that the package contained no measures that were significant enough to provide a boost to is growth outlook.
It comes against a background of higher costs for firms – after Labour’s increases in the minimum wage and the raid earlier this year on employer national insurance.
Business is also being hit by higher energy bills, partly thanks to Ed Miliband’s net zero drive to switch to renewable sources and nuclear power.
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