BENGALURU, June 10 (Reuters) – The British economy is forecast to grow by a modest 1% this year, with the Bank of England expected to implement two more interest rate cuts in 2025, according to a Reuters poll of economists. This outlook remains largely unchanged from previous projections despite ongoing tariff uncertainties.
The survey, conducted before finance minister Rachel Reeves’ comprehensive spending review on June 11, indicates that health and defense will likely see the largest budget increases.
Median forecasts from the June 5-10 poll of 52 economists project 1.0% growth for 2025, slightly accelerating to 1.2% the following year. These projections align with the Office for Budget Responsibility’s latest estimates. The UK economy grew by 0.7% in the first quarter, surpassing expectations, but growth is anticipated to slow to 0.1% this quarter and 0.2% in Q3, with a modest 0.3% rise expected in Q4.
“Our growth forecast for 2025 remains unchanged as tariffs are unlikely to significantly impact the economy. While industries like cars, steel, and pharmaceuticals may face challenges, UK goods exports to the U.S. account for only about 2% of GDP,” said James Smith, an economist at ING.
Although Britain has secured a trade deal with the U.S., exempting it from certain tariffs on steel and aluminum, a 10% levy on goods remains. The Bank of England is expected to maintain its Bank Rate at 4.25% next week, followed by two quarter-point cuts later in the year, reducing it to 3.75%.
Recent data showing a slight uptick in unemployment and slower wage inflation has increased market expectations for these cuts. Economists suggest the central bank’s Monetary Policy Committee may feel more confident in pursuing a gradual easing strategy.
“Weak jobs data and slower pay growth could support an August rate cut,” noted Elizabeth Martins, senior UK economist at HSBC. Inflation is expected to remain elevated at 3.4% this quarter, easing below 3.0% early next year.
— new from Reuters