UK Growth Slashed as Businesses Struggle with Rising Costs and Trade Woes

The BCC has downgraded the UK’s 2025 economic growth forecast to 0.9% (from 1.3%) due to rising cost pressures. Inflation is expected to remain above target until late 2027, with CPI projected at 2.8% in Q4 2025. Unemployment is set to rise to 4.6% by the end of 2025 and remain at that level. Business investment growth has been revised down to 0.6% for 2025 but is expected to recover to 2.0% by 2027. Manufacturing output is predicted to shrink (-0.2%), while construction and services will see modest growth.

Exports are forecast to decline by -0.5% in 2025 due to trade challenges but may recover by 2027. Interest rates will stay higher for longer, with the Bank of England’s base rate at 4.25% in 2025. Wage growth is revised up to 4.2%, adding cost pressures on businesses. Firms are struggling with rising National Insurance and minimum wage costs, affecting investment and hiring. The AI boom could support economic growth, but small businesses need assistance to adopt new technologies. Experts warn that without immediate government action, the economic outlook could worsen.

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• UK Growth Slashed: Businesses Hit by Tax Hikes and Trade Turmoil

UK Growth Slashed as Businesses Struggle with Rising Costs and Trade Woes

The British Chambers of Commerce (BCC) has revised its 2025 Quarterly Economic Forecast (QEF), lowering growth expectations due to increasing financial pressures on businesses. The UK economy is now projected to grow by 0.9% in 2025, down from the previous 1.3% forecast, with growth improving slightly to 1.4% in 2026, though still below earlier estimates. Government spending is expected to be the primary driver of economic expansion.

Inflation is set to remain above the Bank of England’s target until late 2027, with the Consumer Price Index (CPI) reaching 2.8% in Q4 2025, higher than the previously estimated 2.2%, before declining to 2.1% by the end of 2026 and 2% in Q4 2027. Unemployment is expected to rise to 4.6% by the end of 2025 and remain at this level through 2027 as rising labor costs make hiring more difficult. Business investment is forecasted to grow by only 0.6% in 2025, revised down from 0.9%, but is expected to improve to 1.8% in 2026 and 2.0% in 2027 due to increased public sector spending and a more favorable business environment.

Manufacturing output is projected to contract by 0.2% in 2025, before rebounding to 0.8% in 2026 and 1.1% in 2027, while construction and services sectors are expected to experience modest growth. Trade remains a significant challenge, with exports forecasted to decline by 0.5% in 2025 instead of the previously expected 0.2% growth, though a recovery is anticipated with 1% growth in 2026 and 2.1% in 2027.

Imports are predicted to remain flat in 2025 before rising 0.8% in 2026, while net trade is set to decline further through 2027. Interest rates are expected to stay higher for longer, with the Bank of England’s base rate reaching 4.25% by the end of 2025, higher than the earlier forecast of 4%, before dropping to 4% in 2026, with no further cuts projected through 2027. Wage growth is now expected to be 4.2% in 2025, up from the previous 3.8% forecast, before settling at 4% in 2026 and 2027, remaining above inflation and adding further cost pressures on businesses.

BCC Head of Research David Bharier warned that rising domestic taxes and global trade tensions are discouraging investment and hiring, with higher National Insurance and minimum wage increases forcing firms to rethink workforce strategies. Vicky Pryce, Chair of the BCC Economic Advisory Council, stressed that businesses need immediate government support as inflation and interest rates remain high, making it harder for firms to invest and grow.

UK Growth Slashed: Businesses Hit by Tax Hikes and Trade Turmoil

The UK’s economic growth prospects have taken a hit as the British Chambers of Commerce (BCC) sharply downgraded its forecast, citing a “double whammy” of tax increases and trade disruptions affecting businesses.

The BCC now predicts the UK economy will expand by just 0.9% in 2025, down from its earlier estimate of 1.3% at the beginning of the year. Economists at the business group warned that rising cost pressures—particularly upcoming hikes in national insurance contributions and the minimum wage—will strain businesses, limiting their ability to invest and expand.

As a result, the BCC has revised its 2025 business investment growth projection from 0.9% to 0.6%, though it expects a recovery to 1.8% in 2026.

Additionally, a separate survey released on Wednesday highlighted worsening job cuts in the services sector, with employment levels dropping at their sharpest rate since the pandemic. The S&P Composite Purchasing Managers’ Index (PMI) employment gauge fell to 43.9 from 45.1, marking its lowest point since November 2020—excluding the pandemic, the worst decline since the financial crisis.

Vicky Price, chair of the BCC Economic Advisory Council, described 2025 as a “challenging year,” stressing that the UK economy lacks the necessary foundations to drive business investment. She urged the government to provide immediate support rather than relying solely on long-term strategies.

These findings increase pressure on the Chancellor, who is reportedly considering spending cuts in the upcoming spring statement to balance fiscal targets while funding new defense commitments.

The BCC also pointed to escalating global trade tensions as a contributing factor to the UK’s economic slowdown. David Bharier, the group’s head of research, called it a “double whammy” for businesses already grappling with rising domestic costs. The BCC lowered its export growth forecast from 0.9% to 0.5%, warning that trade barriers could weigh on UK exports even if the country avoids the worst of new US tariffs.

A Treasury spokesperson defended the government’s economic strategy, highlighting recent tax cuts, wage increases, and fuel duty freezes aimed at easing cost-of-living pressures. The spokesperson also noted that international bodies such as the IMF and OECD project the UK will experience the fastest economic growth among G7 countries in Europe.

Despite these assurances, business leaders remain concerned about the short-term impact of rising costs and trade uncertainties.