LONDON (Reuters) – One of Britain’s leading business groups on Wednesday cut its forecast for economic growth this year and in 2026 as firms brace for an increase in payroll taxes and other employment costs as well as uncertainties about global trade.
The British economy is now expected to expand by 0.9% this year, the British Chambers of Commerce said, down from a previous projection of 1.3%, and growth in 2026 was revised to 1.4% from 1.5%.
Gross domestic product in 2024 grew by 0.9%, according to official data.
“UK firms are facing a double whammy of rising domestic taxation and a potential global trade war,” BCC’s head of research, David Bharier, said.
“Businesses are telling us the that the rise in National Insurance and the minimum wage will increase costs, stall investment, and cause them to rethink their workforce plans.”
Investment by businesses is expected to grow by 0.6% in 2025, down from 0.9% in the previous forecast, before speeding up to expand by 1.8% and 2.0% in 2026 and 2027 respectively, the BCC said, reflecting a boost from public spending.
Other recent surveys have shown companies warning that a rise in employment costs included in finance minister Rachel Reeves’ October budget, alongside a nearly 7% increase in the minimum wage, will hit investment and hiring.
Reeves is expected to announce more spending cuts in an update on the public finances on March 26.
The BCC downgraded its outlook for exports which it expects to contract by 0.5% in 2025. That compared with a previous forecast for a 0.2% rise, reflecting concerns about global trade as U.S. President Donald Trump raises U.S. import tariffs.
The BCC said it expects exports to grow by 1% next year and 2.1% in 2027.
($1 = 0.7795 pounds)
(Reporting by Suban Abdulla; Editing by William Schomberg)
