UK Economy on the brink of recession as spring statement awaits
The UK economy faces recession risk with high interest rates and inflation expected to increase borrowing by £15 billion by 2030. Economic forecasts for 2025-2026 have been downgraded, and consumer sentiment has hit a 15-month low due to job insecurity and high taxes.
Poor jobs market signs of immediate recession
One of the premier think tanks, the Resolution Foundation, has warned that Britain's fragile jobs market heralds the approach of recession. The economy in the UK is facing tension from high-interest rates and ongoing inflation, both of which will eliminate the headroom of government finances and see borrowing increase by £15 billion to 2030. That will leave the government with the existing deficit standing at around £5 billion as declining employment is likely to drop tax revenues.
Economic forecasts downgraded
Several economists have lowered growth projections for 2025. The OECD lowered its UK growth projection from 1.7% to 1.4% due to tensions between trade wars. The economy will grow only 1.2% in 2026. The British Chambers of Commerce lowered its growth projection from 1.3% to 0.9%, blaming this on high taxation and trade chaos. Almost-stagnant growth of 0.7% was predicted by the Bank of England in February.
Consumer sentiment worsens
Consumer sentiment has also fallen, as the S&P Global UK Consumer Index (CSI) saw a 15-month low in financial optimism about the future. A survey of 1,500 British families identified job insecurity and the more cautious recruitment approach of companies to be contributing to the diminishing optimism about finances. The Resolution Foundation urged income tax threshold freezes to be continued, stamp duty to be cut, and business rates to be overhauled in a bid to drive growth.
