A survey of 96 economic experts found that while the UK is likely to outperform France and Germany in 2025, disastrous national insurance hikes on business will undermine jobs and the wider economy.
The majority of those polled expected only lacklustre expansion this year, short of the 2 per cent rebound the Office for Budget Responsibility forecast for 2025.
Maxime Darmet, senior economist at Allianz Trade said: “Growth will undershoot the government and the OBR’s forecasts. Therefore, tax receipts will probably undershoot as well.”
All but a handful of respondents said UK chancellor Rachel Reeves would end up increasing taxes again before the next general election, expected in 2029, despite her protestations that Britain would not have another big tax-raising Budget in this parliament.
Andrew Oswald, professor of economics and behavioural science at Warwick university, said there would be “a dawning realisation . . . that without income tax and VAT rises, we cannot make the damn sums work”.
Reeves increased employers’ national insurance contributions by £25bn in her autumn Budget in a move set to take effect in April.
Sir Howard Davies, professor of practice at the Paris Institute of Political Science and former director of the London School of Economics said: “The government has chosen to frighten business, which has hit confidence.”
He added that, given the impact, the UK would remain “just outside the Champions League” in the G7 growth rankings.
The economists said UK growth would lag behind the US as the temporary stimulus of higher government spending set out in the Budget faded and higher labour costs hit employers.
They added that people would feel poorer because prices and borrowing costs would remain high and the rising tax burden was already fuelling anxiety over job security.
Fhaheen Khan, senior economist at the manufacturers’ trade group Make UK, said the increase in employers’ national insurance contributions would be “a heavy pill to swallow” for industries whose costs had been rising for years.
Stubborn inflation would also limit the scope for the Bank of England to cut interest rates and the UK would continue to suffer chronically weak investment and productivity, the survey found.
The economists were polled in a survey for the Financial Times before a series of data releases showed the scale of the challenge facing Reeves this year.
Growth went into reverse at the end of 2024, with GDP stalling over the third quarter and contracting in October.
At the same time, price pressures have lingered and business sentiment has soured.
Forecasts compiled by Consensus Economics in December found the average prediction among economists was for GDP growth of just 1.3 per cent in 2025.
Most of the FT survey respondents had similar expectations.
Andrew Goodwin, chief UK economist at the consultancy Oxford Economics, said the OBR had been “much too bullish on the potential for the public sector to drive growth” in reaching its forecast of a 2 per cent GDP increase for 2025.
Other respondents described Labour’s current plans, which imply that growth in public service spending will slow sharply from 2026, as “implausible,” “unrealistically tight” and “not politically credible”.
Simon Wells and Liz Martins, economists at HSBC, said the labour market was “the biggest unknown” for 2025, pointing to corporate plans to deal with the impending rise in National Insurance by cutting headcount, automation, moving jobs overseas, squeezing wages or raising prices.
“All of these are negative for UK workers,” they added. “So the question is how the pain will spread out.”
A separate survey of 500 UK business leaders, carried out by polling firm JL Partners for WPI Strategy just before Christmas, said the government needed to lower the overall tax burden on companies and make regulators more growth-orientated so Britain was more attractive for investment.
