UK economic impact
Four months on from the general election and in the wake of Labour’s first Budget, the new government has focused on enhancing public investment in national infrastructure to foster sustainable, long-term growth. This initiative gives us cautious optimism.
Key announcements included:
Additional £4 billion earmarked for education, including £1.4 billion for the school rebuilding programme.
A reaffirmation of the £5 billion investment in affordable housing, complemented by measures to expedite the planning process.
A renewed commitment to transport infrastructure, including the TransPennine Route Upgrade and support for east-west rail links between Oxford and Cambridge, as well as the extension of HS2 to London Euston.
Significant investments earmarked for the engineering and life sciences sectors.
Additional £4 billion earmarked for education, including £1.4 billion for the school rebuilding programme.
A reaffirmation of the £5 billion investment in affordable housing, complemented by measures to expedite the planning process.
A renewed commitment to transport infrastructure, including the TransPennine Route Upgrade and support for east-west rail links between Oxford and Cambridge, as well as the extension of HS2 to London Euston.
Significant investments earmarked for the engineering and life sciences sectors.
While additional funding for hospital repairs and upgrades is promising, all major capital expenditures will face a new audit process, which could delay significant projects, particularly from the previous government’s new hospital programme.
The Office for Budget Responsibility (OBR) has cautioned against expecting rapid economic growth, predicting GDP growth of 2% in 2025, 1.8% in 2026, and 1.5% per annum thereafter. Plans for increased borrowing may also exert slight inflationary pressures, with the OBR forecasting CPI could rise to around 2.6% in 2025, gradually decreasing to 2% by 2029.
Despite these public sector commitments, the private sector remains subdued. There is yet to be a positive increase in private development, reflecting caution in the current economic environment. This imbalance highlights the need for clear, consistent policies to stimulate private sector confidence and investment, which will be critical to achieving sustainable growth.
In such an economic environment, effective economic stewardship will be crucial in attracting the private sector investment needed for these initiatives.
The International Monetary Fund (IMF) anticipates steady yet modest global growth through 2025, forecasting a 3.2% annual increase globally and 1.8% for advanced economies, aligning with OBR predictions for the UK. Global inflation has been progressively easing from the shocks experienced two years ago, projected to decrease to 5.8% in 2024 and 4.3% in 2025. However, the geopolitical landscape remains highly unpredictable, a continuation of the challenges seen throughout the year. Escalating tensions in the Middle East threaten to disrupt oil prices and supply chains, while the prolonged conflict in Ukraine continues to raise concerns over deeper UK and European involvement, particularly if a new US administration adopts a less engaged stance. Further concerns include the contracting Chinese economy and the growing trend towards protectionism in global trade.
Global economic outlook
The International Monetary Fund (IMF) anticipates steady yet modest global growth through 2025, forecasting a 3.2% annual increase globally and 1.8% for advanced economies, aligning with OBR predictions for the UK. Global inflation has been progressively easing from the shocks experienced two years ago, projected to decrease to 5.8% in 2024 and 4.3% in 2025. However, the geopolitical landscape remains highly unpredictable, a continuation of the challenges seen throughout the year. Escalating tensions in the Middle East threaten to disrupt oil prices and supply chains, while the prolonged conflict in Ukraine continues to raise concerns over deeper UK and European involvement, particularly if a new US administration adopts a less engaged stance. Further concerns include the contracting Chinese economy and the growing trend towards protectionism in global trade.