At the time of writing, news about the UK economy could be more encouraging.
“UK economy unexpectedly shrinks by 0.1%” and “Higher business taxes take toll on UK economy as companies cut back hiring” aren’t the headlines the new Labour government wanted. Not when they promised to kickstart economic growth.
Doom and gloom are hardly suitable for the holiday season. Is there room for optimism?
In the Finalto Watchlist 2025, we laid out a positive scenario for UK growth:
“The government’s Budget was criticised by many business leaders, but let’s have a reality check: the government is investing a lot more money. This will be a positive in time, as long as it’s well marshalled spending. True, borrowing is going to rise a lot, but this could be more stimulative than many believe, particularly as the additional spending is front-loaded. Moreover, economic headwinds from Europe could turn into tailwinds if there is peace in Ukraine and energy prices come down off the back of Trump’s White House agenda. Inflation is falling and the Bank of England will continue to cut interest rates. Moreover, the UK could be spared expensive tariffs – we already buy more from the US than we sell to it, which means it’s not in the Trump firing line. A trade deal was on the table during Trump’s first term and he’s a noted Anglophile.”
Since publication, inflation has proved a little sticky. Rising pay growth means the Bank of England may hold off on immediate rate cuts.
On the other hand, considering how often Americans enjoy making fun of relatively low British salaries on social media, are rising wages a source of concern or long overdue?
Moreover, as the Financial Times notes, we should but cautious about overreacting to negative data: “The PMI is an indicator of business sentiment, based on the balance between companies reporting improvements and deteriorations, and can exaggerate moves in the economy when many groups are hit by the same shock. Official data shows that redundancies have not risen in recent months and the number of payrolled employees has fallen only slightly.”
And to be fair, the government claims to be thinking in terms of long-term success not quick fixes. From that perspective, we might well be underestimating their ambition.
So will 2025 be a year of prosperity, growth, and hope for the United Kingdom? It’s nearly Christmas, so let’s go for the optimistic scenario.
For a more balanced view, be sure to check out Watchlist 2025: The World at a Crossroads. By thinking through our collective possible futures, we aim to help bring into clearer relief the stakes, the challenges and the opportunities that face humanity in the coming year and beyond.
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