Back to today’s briefing

Story perspectives

UK Economy Grows Amid Challenges, Faces 2026 Slowdown

11/4/2025

39 4 Full Breakdown

Summary

Story summary

The UK economy grew 0.7% in Q1 2025 and 0.3% in Q2 2025, driven by government spending.
The EY ITEM Club projects growth below 1% in 2026 because of tax rises and fiscal tightening.
Business investment is forecast to decline to 0.8% in 2026.
UK manufacturing shows signs of recovery in October 2025, aided by Jaguar Land Rover reopening, while confidence remains low amid rising costs and policy uncertainty.

History

Historical Context

Following the 2008 financial crisis, the UK government, led by Chancellor George Osborne, implemented austerity measures in 2010, resulting in a 0.9% GDP contraction and public sector net borrowing of £156 billion. These policies aimed to reduce national debt but faced criticism for potentially stifling growth, highlighting ongoing challenges in sustaining economic recovery amid rising costs and uncertainty.

1 of 2

Story summary

The UK economy grew 0.7% in Q1 2025 and 0.3% in Q2 2025, driven by government spending.
The EY ITEM Club projects growth below 1% in 2026 because of tax rises and fiscal tightening.
Business investment is forecast to decline to 0.8% in 2026.
UK manufacturing shows signs of recovery in October 2025, aided by Jaguar Land Rover reopening, while confidence remains low amid rising costs and policy uncertainty.

1 / 2