The UK is expected to see growth this year, but not enough to prevent the Labour government from raising taxes again before the next election, as per an annual Financial Times survey of economists.
The survey of 96 top economists revealed concerns that previously announced tax increases on businesses and individuals might have negative effects on jobs and the broader economy, despite the UK possibly outperforming France and Germany in 2025.
Most economists are predicting a modest rate of growth this year, falling short of the 2 per cent rebound forecasted by the Office for Budget Responsibility.
“Growth is expected to be lower than government and OBR forecasts, leading to lower tax receipts as well,” said Maxime Darmet, senior economist at Allianz Trade.
Respondents overwhelmingly believed that the UK chancellor would have to increase taxes before the next general election in 2029, despite earlier promises from her.
There are concerns about the impact of the tax increases on business confidence, potentially keeping the UK outside the top G7 growth rankings, according to Sir Howard Davies.
While the UK’s political stability and services-based economy may fare better than France and Germany, potential US tariffs under president-elect Donald Trump could still have negative effects, according to the economists surveyed.
Economists anticipate that UK growth will still lag behind the US, with higher labor costs impacting employers as government spending stimulus fades.
While wages are expected to rise in real terms, increased prices and borrowing costs, coupled with rising taxation, could lead to concerns about job security.
The UK faces challenges in weak investment and productivity, along with stubborn inflation, limiting the Bank of England’s ability to cut interest rates, the survey found.
Many see inflation levels as a concern, with prices still perceived as high even after wage corrections, impacting household finances and future anxieties, according to some economists.
Higher taxes could lead to improved public services and a sense of security, even if households feel less financially stable, according to experts.
Challenges in the labor market, including rising employment costs, automation, and job offshoring, could negatively impact workers, with uncertainties remaining on how these challenges will unfold, economists caution.
Additional reporting by Jim Pickard
