A tale of two halves
Think tank: National Institute of Economic and Social Research (NIESR)
Author(s): Various authors
February 12, 2025
This report from UK think tank the National Institute of Economic and Social Research anticipates a 1.5% growth for 2025.
The measures announced in the Chancellor’s October 2024 Budget, which will start having a tangible effect during the course of 2025, coupled with continued growth in business investment will lead to a 1.5 per cent growth rate for the UK economy in 2025.
If this is realised, the UK could then be the third fastest growing economy in the G7. However, the increase in GDP won’t translate immediately into higher living standards for every household. We anticipate that the living standards of the bottom 40 per cent of households will not return to pre-2022 levels before the end of 2027.
Whilst real personal disposable income is projected to grow by 1.9 per cent in 2025 and 1 per cent in 2026, this will not compensate for the fall in living standards that happened between 2022 and 2024.
We expect that inflation will average around 2.4 per cent in 2025, with persistent wage growth and an expansionary fiscal policy acting to limit the scope for the Bank of England to adjust interest rates.
We therefore anticipate just one further rate cut in 2025.
