The Confederation of British Industry (CBI) has sharply downgraded its forecast for UK economic growth, citing a mix of global and domestic pressures that threaten the nation’s expansion.
From December’s projected 1.6%, growth for 2025 is now pegged at just 1.2 per cent, while 2026 projections have fallen from 1.5 per cent to just 1 per cent. The CBI described business investment as “weak” due to rising costs, putting the brakes on Chancellor Rachel Reeves’s growth ambitions.
- GDP rose by a solid 0.7 per cent in Q1 2025
- Yet, underlying activity “remains sluggish”, with weak demand and bleak business sentiment
Increased employment costs—due to higher national insurance contributions and national minimum wage—have forced many firms to hike prices while cutting hiring and capital investment.
Shadow Chancellor Mel Stride commented: “The CBI’s warning is clear… higher employment costs linked to Labour’s Jobs Tax are killing growth.” He accused Reeves of being cornered: “Make no mistake – more taxes are coming.”
The CBI warns that us tariffs are adding pressure—export volumes to the US saw a record £2 billion slump in April 2025 after new import levies. This follows a US–UK deal reached at the G7 summit to lower barriers, yet a 10 per cent tariff remains on steel, cars and other goods.
Louise Hellem, CBI chief economist, urged decisive action: “Our latest economic forecast underlines the challenges… buffeted by domestic and global headwinds… it’s vital the industrial strategy helps drive a thriving environment for all businesses.”
CBI recommends:
- Fast-track reforms to business rates
- Support for apprenticeships and tech adoption
- Stronger incentives for investment
The Bank of England is expected to cut interest rates by year-end as inflation remains above target and growth momentum wanes. While the first quarter showed resilience, April’s 0.3 per cent contraction of GDP revealed just how vulnerable the recovery is.
Why this matters
- Business investment is shrinking
- Export markets under pressure
- Costly fiscal measures risk curbing growth
- Policy recalibration is essential
The CBI’s revised outlook serves as a wake‑up call for Chancellor Reeves. She now faces a delicate balancing act—supporting growth while managing rising costs and trade uncertainties.
In sum, the UK economic growth downgraded narrative underscores emerging cracks in the UK’s recovery. With growth forecasts trimmed, targeted industrial policies will be needed to revive confidence and investment.
