Restaurants and pubs on James Street in London, UK, Friday, December 13, 2024.
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The economy in the UK increased by 0.1% in the fourth quarter, beating expectations, according to the preliminary estimate of the UK Office for national statistics (ONS) on Thursday.
The economists interviewed Reuters expected that GDP in the country would arrange 0.1% in the previous three months.
British economy recorded zero growth in the third trimester and has since recorded the weakness of the monthly data on GDP, with 0.1% contraction in October ia IA 0.1% spread in November.
Slow growth and Recent fall in inflation encouraged the Bank of England last week In order to make your first decrease in interest rates of the yearlowering reference rates to 4.5%.
The central bank signaled further circumcision of the rate while inflator pressures fall, but noted that the higher global energy costs and regulated prices in the third quarter 2025 will push the main inflation to 3.7% “, even if they are fundamental domestic Inflator pressure was expected to spoil further. To return to your goal of 2% by 2027.
The central bank also halved the forecast of economic growth in the UK with 1.5% to 0.75% this year.
A bad economic effect will endure additional pressure on the UK Chancellor Rachel Reeves, whose fiscal plansannounced last fall, criticized for increasing the tax burden on British companies. Critics say that plans, which increase the amount that employers pay in the contribution of national insurance (neither) – earning tax – as well as an increase in the national minimum wage, they could harm investments, jobs and growth.
Chancellor Reeves defended the “Autumn Budget”, saying that the financing of public consumption requires £ 40 billion in taxes and that it prioritized economic growth.
2025. Reduced growth
Economists widely expected that the British economy would end a year of low notes, and also reduced their growth forecasts for 2025.
“Larger taxes for companies, long -term withdrawal from previous rise in interest rates and softer demand for abroad explained why we have revised GDP Growth Forecasts UK, from 1.3% to 0.5% for 2025. IS 1.6% on 1.5% for 2026 “. Paul Dales, a major British economist of Capital Economics, said in a note this week.
View of the Skyline City of London looking at the Thames and the Waterloo River at the sunset on February 10, 2024 in London, the United Kingdom.
Mike Kemp | In pictures | Getty Images
Sanja Raja, a senior economist in Deutsche Bank, agreed, saying that a short -term fall on growth prospects in the UK 2025 were “inevitable”.
“Forbid the increasing audit, a negative effect from the effect of [the fourth quarter of 2024] It will automatically pull our growth prognosis of 2025 of 1.25%. How much would we reduce? About 0.25 percentage points – at least, “he said in a research note this week.
“There are more bad news. The survey data for the beginning of the year have also shown a return. Lack of risk to our first quarter 2025. Data indicating only a modest recovery for the beginning of the year.
“To be sure, trade uncertainty will stay for a while,” he added.
Threat to tariffs
US President Donald Trump threatened to impose tariffs on goods from the European Union and the UK, but indicated that Britain, with which they now have a more balanced trade relationship, with He could make an agreement to avoid the levy.
The UK surely hopes to avoid this to Trump’s tariff wrath, and Reeves told CNBC last month The UK “is not part of the problem” When it comes to a “permanent” trade deficit that the president wants to fight with.
US President Donald Trump examined an honorary guard during a welcome ceremony at Buckingham Palace in Central London on June 3, 2019, the first day of a three -day state visit to the UK
Mandel Ngan | AFP | Getty Images
Last week, the Bank of England stated that any potential US tariffs on Britain “could be inflation or disinflation for the UK, depending on the trade policies of other countries and the relative power of different transmission channels.”
“Most of these channels would work to reduce economic activities in the UK. However, some channels are likely to reduce inflation in the UK, while others could push it on it,” the Central Bank said.
For example, a smaller demand for exports to the UK would be disinflation, but disorders of the supply chain due to missing components could lead to short -term price jumps, Boe noted.
