UK economy to grow by more than expected - BCC

6th Jun 2024 09:33

(Sharecast News) - The British Chambers of Commerce upgraded its outlook for the UK economy on Thursday, but warned long-term growth was likely to be subdued.

The business group said that following a stronger start to the year, the UK economy was now on track to grow 0.8% this year and by 1% in 2025.

That compares to expectations for growth of 0.5% in 2024 and 07% in 2025 in its last Quarterly Economic Forecast.

But it also noted that long-term growth was "unlikely to be strong" and left its 2026 forecast unchanged at 1%.

It continued: "The overall profile remains flat, as a poor outlook for exports acts as a drag anchor and high interest rates continue to limit investment."

The BCC expects consumer price inflation - currently at 2.3% - to dip below the Bank of England's 2% target this year before rising again to 2.3% in the fourth quarter. It expects inflation to end 2025 at 2.1% and 2026 and 2.2%.

Vicky Pryce, chair of the BCC's economic advisory council, said: "There is life in the UK economy, but if it is to gain momentum then it must be nurtured.

"With interest rates expected to be cut at a modest pace and pay outstripping inflation, businesses will be holding onto much of their money, even as confidence rises after the mini-recession."

David Bharier, head of research, added: "With the recession of 2023 concluded, and interest rate cuts now expected later in 2024, the environment should become more stable for SMEs to invest.

"However, the margins are slim, and any further shocks could easily dent this recovery."