BCC press release: BCC economic forecast - growth continues to flatline

The latest British Chambers of Commerce (BCC) economic forecast has upgraded growth expectations for 2025. But overall, the outlook remains subdued. The forecast shows: 

• GDP growth in 2025 revised up to 1.3% (from 1.1% in the previous forecast) GDP forecast for 2026 and 2027 remains unchanged at 1.2% and 1.5%.  
• Business investment is expected to grow by only 1.6% this year and will remain subdued across 2026, rising only by 1.9%.    
• Net trade will continue to weigh on GDP, with exports projected to increase by 3.1% in 2025 and 3.3% in 2026, while imports are expected to rise 4.4% this year and then slow to 1% in 2026. 
• The inflation rate is forecast to hit 3.7% in Q4 2025, before easing to 2.5% by the end of 2026.  
• The interest rate is expected to remain at 4% for the rest of 2025 and fall to 3.5% by the end of 2026.  

UK Economic Outlook       

The UK economy is expected to grow by 1.3% in 2025, revised up from the previous forecast of 1.1%. This upgrade reflects better-than-expected economic performance in Q1, supported by public spending. However, GDP is expected to slow slightly in 2026 to 1.2%, before rising to 1.5% in 2027 – unchanged from the previous forecast. The growth picture varies significantly across sectors. Construction is expected to be the best performing sector this year, growing by 1.5%, revised up from 0.8%. Meanwhile, services are forecast to grow by 1.3%, and manufacturing by 1%.   

Business investment to remain weak 

Business investment across 2025 is projected to be 1.6% - a significant downgrade from 4.8% in the last forecast. This is due to subsequent downward revisions on investment estimates by the ONS to a level more consistent with the weaker business sentiment seen in BCC business surveys. Investment plans across the majority of SMEs remains subdued due to increased costs, most notably the national insurance rise Business investment is then forecast to rise slightly to 1.9% in 2026 and recover to 3% in 2027 

Export growth won’t improve net-trade 

Exports across this year are projected to rise by 3.1% (an upward revision from 2.0% in the last forecast). The upgrade is reflective of stronger than expected performance in Q1 ahead of the introduction of US tariffs. However, exports will remain modest overall, in the face of continued global uncertainties and trade frictions, such as the removal of the US de minimis allowance. Exports are forecast to grow by 3.3% in 2026 and 3.2% in 2027.  

Imports are expected to grow by 4.4% this year (compared with 3% in the previous forecast), before falling to 1% in 2026, then up to 3.3% in 2027. This means Net trade continues to contract, with figures of -1.3% in 2025, -0.7% in 2026, and –0.9% in 2027.  

Inflation to remain stubbornly above BoE target 

The BCC forecast suggests inflation will remain a thorn in the side of the UK economy, with CPI at 3.7% by the end of this year (revised up from 3.2%). The National Insurance increase, wage growth and global trade tensions continue to create business price pressures. CPI is expected to ease to 2.5% by the end of 2026, and then 2.1% in Q4 2027. 

No further interest rate cuts this year 

Given a pick-up in inflation, further reductions in the interest rate are unlikely - leaving the base rate at 4% by the end of 2025. Only two cuts are projected next year due to the persistence of price rises. The interest rate is expected to fall to 3.5% by the end of 2026 and then remain there to the end of 2027.  

Average earnings will continue to outpace inflation 

Average earnings are expected to remain significantly above inflation this year, reaching 4.3% by the end of Q4 (up from 4.2% in the last forecast). That’s likely to add further inflationary pressure to the economy. The trend for the next few years remains the same as previously forecast, with wage growth of 4.1% in 2026 and 4% in 2027.  

Unemployment to remain relatively static  

The forecast suggests unemployment will remain broadly unchanged at 4.7% this year compared with 4.6% in the Q2 forecast. With wage growth and the NI hike continuing to impact the hiring appetite of firms, unemployment is expected to end 2026 at the same level of 4.7%. The forecast suggests the rate will ease slightly to 4.5% in 2027.  

David Bharier, Head of Research at the British Chambers of Commerce said: 

"Our latest forecast underlines the difficult reality facing UK businesses – and shows that economic growth is stuck in first gear.  

“GDP has been upgraded to 1.3% for this year, due to better-than-expected performance in Q1 supported by public spending. However huge uncertainties remain as firms assess the impact of NICs increases, new employment regulations, and yet more trade barriers.  

“A net trade deficit will continue to weigh on growth going forward. Global trade tensions, ongoing conflicts, and the recent removal of the USA’s de minimis threshold for small exporters are acting as a drag anchor on exports. 

“Inflation is also proving more stubborn than expected. Businesses face relentless cost pressures, from the NICs rise to higher wages and global tariffs. These factors are directly constraining investment, which we have revised down. 

“The forthcoming Autumn Budget will be a pivotal moment. The Chancellor faces some tough decisions as more tax rises risk severely undermining sentiment and investment even further. Sustainable growth depends on driving productivity through modern infrastructure, a skilled workforce, and seizing the opportunities of the AI revolution. 

“SMEs need the tools to invest, trade and expand. Without this, the UK risks being locked into a prolonged low-growth trap."

Commenting on the forecast, Vicky Pryce, Chair of the BCC Economic Advisory Council, said:     

“While 2025 may be slightly better than forecast, the overall growth landscape for the UK in the next couple of years looks weak. The economy will continue to be buffeted by global headwinds, alongside ongoing worries about high bond yields.  

“Government expenditure has bolstered the economy this year, but the spending taps are likely to be tightened very soon across Whitehall.  

“The spectre of inflation is set to loom over the economy for some time to come, with consumers reluctant to spend. That’s likely to slow the path of interest rate cuts.  

“Government long-term strategies are welcome – but firms can’t only exist on promises of tomorrow. They need help today to grow, recruit and compete.”