The UK economy is showing signs of modest growth, according to economists at PwC who have revised their projections upwards for this year. The country’s gross domestic product (GDP) is now expected to grow by 1.3% in 2025, up from the previously forecasted 1.1%. This adjustment comes after a surprisingly robust performance in the first half of the year, with GDP expanding by 0.7% in the first quarter and 0.3% in the second.
Government spending played a significant role in this growth, with increased state investment in areas like healthcare helping to bolster the economy in the second quarter. Despite these positive developments, household consumption has moderated, and investment by firms has declined due to ongoing economic uncertainties and rising costs.
Barret Kupelian, Chief Economist at PwC UK, noted that while consumer spending has been slightly better than anticipated, growth continues to merely tread water without significant momentum. He remarked, “The UK economy continues to tread water, with GDP growth flatlining but avoiding outright contraction.”
Kupelian emphasized that a sustained recovery would require a boost in household spending and private sector activity. Although the GDP is projected to grow by 1.2% next year, optimistic estimates suggest growth could reach as much as 1.6% if consumer behavior shifts towards more spending versus saving.
Highlighting the current economic landscape, Kupelian observes, “This month’s economic picture is a story of gradual change rather than dramatic shifts. While headline CPI has decreased due to falling energy prices, stubborn inflation in service sectors suggests that the path to economic targets may be uneven.”
Overall, while the UK economy is not declining, its path to robust recovery seems contingent on increased domestic consumption and private sector engagement, underscoring the delicate balance policymakers face in nurturing growth.