The UK economy is set to sail past expectations over the next two years as falling inflation and an uptick in consumer confidence help fuel growth, according to a report out today.
The British economy’s recovery from a shallow recession in the second half of 2023 looks set to continue for the rest of 2024, with growth for the year forecast to be 0.5 per cent, according to a report from KPMG.
Continued improvements in real household disposable income and further improvements in underlying inflationary pressures will accelerate the economy in 2025, KPMG said, with growth for the year forecast to rise to 0.9 per cent.
“While households have benefitted from a pickup in real earnings and a relatively stable labour market, business investment could also return as an engine of growth,” said Yael Selfin, chief economist at KPMG UK.
“Political uncertainty will now resolve sooner with a summer election and a potential fiscal event in the autumn, setting out the new government’s economic agenda.”
The report, which said the UK economy was now “turning a corner”, also pointed to the uplift to consumer spending caused by National Insurance Contributions having been cut from 12 to eight per cent in the past year. The tax cut is expected to boost real household spending by one percent overall.
KPMG’s prediction comes after the UK’s quarterly GDP growth between January and March this year was revised up from 0.6 to 07 per cent by the Office for National Statistics on Friday. KPMG’s figures were calculated on an annual basis.
The news could be a boon to Rachel Reeves and the Labour Party, whose fiscal plans are heavily reliant on robust growth if they are to avoid raising taxes or making big cuts to public spending.
More broadly, the Big Four firm also forecast a slowdown in the global economy, falling from last year’s 2.7 per cent to 2.5 per cent in 2024 in a reflection of “elevated geopolitical uncertainty”.
Growth will then rebound to 2.7 per cent in 2024, the firm said, as inflation continues to cool at a slower rate than it emerged.