Budget unlikely to be growth game changer – British Chambers

The Autumn Budget is unlikely to kickstart the UK economy – with the growth outlook remaining subdued.

That’s according to the British Chambers of Commerce (BCC) in the first economic forecast by a major business organisation since the Chancellor’s statement.

The British Chambers’ economic forecast shows:

• GDP growth in 2025 revised up marginally to 1.4 per cent (from 1.3 per cent in the previous forecast), while GDP forecast for 2026 and 2027 remains unchanged at 1.2 per cent and 1.5 per cent 

• Business investment is expected to grow by only 0.9 per cent in 2026, before picking up to 1.5 per cent in 2027

• Exports projected to increase by 1.8 per cent in 2026 and 2.4 per cent in 2027 (down from 3.3 per cent and 3.2 per cent in the last forecast

• The inflation rate is forecast to ease to 2.1 per cent in Q4 2026, before easing to 2 per cent by the end of 2027

• The interest rate is expected to be 3.75 per cent by the end of this year, and then only fall slightly to 3.5 per cent by Q4 2026

The UK economy is expected to grow by 1.4 per cent in 2025, revised slightly up from the previous forecast of 1.3 per cent, driven by strong public spending.

However, GDP is expected to slow to 1.2 per cent in 2026, before rising to 1.5 per cent in 2027 – unchanged from the previous forecast, because of productivity challenges and cautious fiscal tightening. 

The growth picture varies significantly across sectors.

Next year manufacturing is forecast to grow by 0.9 per cent, construction 1.1 per cent and services 1.3 per cent.

In 2027, growth in manufacturing is expected to be 1.8 per cent, construction 1.9 per cent and services 1.6 per cent. 

Business investment is forecast to suffer significantly next year – falling from expected growth of 3 per cent in 2025, to just 0.9 per cent in 2026.

It is then expected to rise again to 1.5 per cent in 2027.

The projected weak levels of business investment are due to ongoing cost pressures on firms, highlighted in the BCC’s business surveys, and the lack of direct growth measures in the Budget. 

With global trade uncertainty continuing, export growth is expected to fall from 3.0 per cent this year to 1.8 per cent in 2026 (a downgrade from 3.3 per cent in the last forecast).

The downgrade reflects the global impact of tariffs and the lack of delivery yet on the proposed UK-EU reset. 

Imports are expected to grow by 3.8 per cent this year, before falling to 1.4 per cent in 2026, then up to 2.8 per cent in 2027.

This means net trade continues to contract, with figures of -0.9 per cent this year and next, and -1.1 per cent in 2027.

 The BCC forecast suggests inflation will continue to ease next year, with CPI at 2.1 per cent by the end of 2026, with wage growth cooling and a softening overall labour market. Inflation is forecast to reach the Bank of England target of 2 per cent by Q4 of 2027. 

With inflation easing, alongside a loosening labour market and weak growth, further interest rate cuts are likely, albeit modest.

The interest rate is expected to be 3.75 per cent by the end of this year and fall to only 3.50 by December 2026.  

Average earnings are expected to continue easing through the forecast period. Wage growth is anticipated to be 4.3 per cent by the end of this year, falling gradually to 3.8 per cent in 2026 and 3.5 per cent in 2027 (down from 4.1 per cent and 4.0 per cent in the last forecast). 

The forecast expects unemployment to rise to 5.1 per cent in 2026, as the labour market continues to loosen.

Firms will continue to face ongoing costs pressure, sluggish productivity and low output limiting recruitment appetite.

The unemployment rate is then expected to ease to 4.8 per cent in 2027. 

David Bharier (pictured), head of research at the British Chambers of Commerce, said: “Our forecast suggests last month’s Budget is unlikely to be a growth game-changer for the UK economy.

“The outlook for SMEs in 2026 will continue to be challenging with business investment and export growth struggling.

“Inflationary pressures, specifically from rising labour and energy costs, are likely to persist, meaning only modest cuts in the interest rate.

“Unemployment will be a key indicator to track as labour costs rise and automation costs ease.

“Taken together the forecast paints a picture of an economy remaining stuck in low gear. Businesses are showing remarkable resilience and innovation, but many are weighed down by political uncertainty and the cumulative cost pressures. 

“Delivery on growth is now key – the Government has published industrial, trade, and infrastructure strategies, and these must translation into action.

“The UK is trapped in a low growth cycle, with consequences for both the fiscal and political landscape. Maximising the AI roll-out and global trading opportunities could help break the deadlock.”