According to a leading bank's forecast, the º£½ÇÊÓƵ economy is on track to expand twice as fast as its European peers next year thanks to the spending boosts introduced in October’s Budget.
Analysts at ING have pointed to an estimated growth of 1.4 per cent for Britain's gross domestic product (GDP) in the coming year, outlined in the bank’s annual economic outlook, meanwhile predicting a mere 0.7 per cent increase for the Eurozone economies, as reported by .
The surge in the º£½ÇÊÓƵ’s economic growth is largely attributed to the £40bn additional spending declared in Chancellor Rachel Reeves’ October Budget – a move that ING anticipates will translate into higher public sector wages and employment. "A lot of the [additional spending] is through extra departmental spending, [which] will inevitably end up in wages," according to ING’s º£½ÇÊÓƵ economist James Smith, who adds: "That has quite a high fiscal multiplier compared to tax cuts... so I don’t think it’s that controversial to say the growth rate through the first half of next year will be a bit stronger."
Notwithstanding these positive projections, there are cautionary notes with Smith advising that Reeves’ increase of National Insurance is expected to impact growth in the way typical tax hikes do, rather than inducing an inflationary spike in prices as some analysts might fear.
Fuelled by an injection equivalent to an additional 1.5 per cent of the º£½ÇÊÓƵ's GDP, Reeves' budget measures are set to cement the º£½ÇÊÓƵ's robust position against the slower-paced Franco-German axis of the Eurozone, with the latter bracing for another sluggish year in 2025, as predicted by ING's analysis.
Carsten Brzeski, global head of macro at ING, has forecasted a contraction in the Eurozone between the end of 2024 and the start of the following year, with political turmoil in France and Germany impacting the continent's prospects. However, he anticipates Western Europe to rebound towards the end of the year, growing by 1.4 per cent and 1.2 per cent in the third and fourth quarters of 2025 respectively.
"We predict a winter recession in Europe now, fourth quarter and first quarter next year, so stagnation at the edge of a technical recession," Brzesky stated during a press briefing. He further noted: "I think the big risk right now is that we still half half a year – the first half of next year – with Germany and France at a complete standstill. We are looking at another six months of at least political stagnation."
The ING analysts also warned that Germany and France's dependence on manufacturing and goods leaves them more vulnerable to the tariffs being proposed by Donald Trump, while the º£½ÇÊÓƵ's service-dominant economy – though still susceptible – is less likely to be targeted by the President-elect.
