BCC Economic Forecast: Rising Business Costs to Hit Wider Economy
Our latest Quarterly Economic Forecast was published on Thursday – with some great media coverage. The forecast highlighted improved growth in 2025 and 2026 – but largely down to increased government spending. The impact of extra costs announced in the Budget are expected to hit business investment, recruitment and earnings. Here are the key points from the QEF:
GDP growth in 2024 downgraded from 1.1% to 0.8%, while the figures of 1.3% in 2025 and 1.5% in 2026 are up from our last forecast (previously 1.0% and 1.1% respectively).
Business investment will fall from 1.5% growth in 2024 to 0.9% in 2025 as firms face increased costs including national insurance. Investment is projected to recover to 2.1% in 2026.
The inflation rate will remain slightly above the Bank of England’s 2% target overall, hitting 2.4% in 2024, before falling to 2.2% in 2025 and 2.0% in Q4 2026.
Interest rates are forecast to be 4.0% at the end of 2025 and fall to 3.50% in 2026.
Imports are expected to contract by 0.2% in 2025 and grow by just 0.9% in 2026. Exports are forecast to grow by 0.2% in 2025 rising to 1.1% by the end of 2026.
Here’s what our Head of Research David Bharier told journalists:
“Our forecast expects the national insurance hike, alongside other growing cost pressures on business, to impact on several economic indicators over the coming months”
“GDP is expected to pick up slightly next year, but that’s likely to be down to more government spending. Our research continues to show that most SMEs are not increasing investment, amidst an array of rising costs and admin burdens.”
“The knock-on effect of rising business costs are likely to restrict wage growth in the short term and employment, as firms struggle to pass on costs and boost recruitment. With fears of a tariff war and continued trade barriers with the EU, international trade will be challenging for many firms."
Click here to read the full press release
Click here to read a data infosheet
Business Need Concrete Plans To Grow Economy
On Thursday morning, the Prime Minister made a keynote speech on his ‘Plan for Change’. The Chief Executive of Thames Valley Chamber, Paul Britton, was delighted to represent the Chamber network at the speech in Berkshire. The PM announced targets covering the economy, housebuilding, the NHS, policing, pre-school education and green energy.
Responding to the speech our Director General Shevaun Haviland said:
“It was good to hear the Prime Minister double down on his commitment to grow the economy and highlight the importance of reforming the planning system.”
“The target of 150 new infrastructure projects is one that business will welcome, with its potential to boost regions and reinvigorate supply chains. But there is still a huge gap between the what and the how and when.”
“With a bruising budget forcing many firms to revisit their investment and hiring plans, the pathway to this promised growth needs to accelerate.
“The cost-of-living crisis and the cost of doing business - are two sides of the same coin. They can’t be dealt with in isolation. Boosting private sector investment is fundamental to improving the cost of living.
“That’s why it’s crucial that Government creates the right conditions for businesses to stay competitive and grow in communities across the UK.”
Click here to read the full press release