Introducing its latest Economic Outlook, KPMG has suggested that real GDP in the UK, which stood at 0.8% last year, could double to 1.7% in 2025.
However, it warns, this short-term increase in growth is unlikely to be sustained as the economy continues to be constrained by the weak pace of productivity growth and shortfalls in labour force participation.
The UK Economic Outlook, January 2025, which can be found here, also forecasts a series of gradual interest rate cuts by the Bank of England to take the base interest rate to 4.00% by the end of the year.
Looking at the outlook for trade, the report is much less optimistic with the willingness of the incoming administration in the United States to use tariffs to achieve policy goals being a particular note of concern.
KPMG Chief Economist, Yael Selfin, said:“Trade tensions and uncertainties about the scale and timing of tariff measures add another layer of uncertainty to the global economic outlook. While we expect some form of tariff barriers to be in place by the end of 2026, a slow ramping-up could help limit its impact on growth in the main forecast.”
A flare-up in trade frictions which sees tit-for-tat tariffs imposed around the world could, she concluded, lower UK GDP by 0.4%, with an even larger hit to more export-oriented economies in Europe.
