Labour’s stuttering growth ambitions suffered a fresh blow yesterday as the Bank of England slashed its UK GDP forecast and warned of rising job losses.
The Bank predicted growth would slow to 0.9 per cent in 2026 while unemployment would reach 5.3 per cent – adding more than 70,000 to the jobs scrapheap.
It comes just two weeks after Rachel Reeves jetted off to Davos to tell global elites at the World Economic Forum that ‘this is the year that Britain turns the corner’.
Instead, tax hikes, minimum wage rises and a raft of new workers’ rights on business are putting the brakes on the private sector.
It is a far cry from Labour’s pledge of the strongest growth among the G7 countries.
Instead, Britain has the highest inflation rate in the G7 at 3.4 per cent. The Bank predicts inflation will fall to 2 per cent by April – but officials are still worried enough about it persisting that they left interest rates on hold at 3.75 per cent yesterday.
Andrew Bailey said ‘subdued’ growth was expected for the rest of the year
That means squeezed borrowers are likely to have to wait until March or April for any relief. The dismal forecast was blamed on a worse-than-expected performance for the economy and rising joblessness, partly as a result of uncertainty ahead of last November’s Budget.
Tory shadow chancellor Sir Mel Stride said: ‘The Bank of England’s decision to cut its growth forecast for the next two years is deeply concerning, but it is no surprise.
‘Rachel Reeves and Keir Starmer promised growth, but Labour’s mismanagement has delivered the opposite – and the Bank has given its verdict.’
Bank of England Governor Andrew Bailey said they expected ‘subdued’ growth to continue throughout the year.
He added: ‘The surveys are beginning to show some signs of an uptick. On the other hand, the message we’re getting from the agents – they use the word lacklustre.’
The Bank’s latest forecast suggests the economy grew by 1.4 per cent last year. The prediction of 0.9 per cent in 2026 is down from a previous projection of 1.2 per cent. Next year’s GDP growth outlook was also downgraded, from 1.6 per cent to 1.5 per cent.
The unemployment forecast for this year was increased from 5 per cent to 5.3 per cent. It is currently 5.1 per cent, a post-pandemic high.
The Bank’s quarterly Monetary Policy Report painted a damning picture of conditions for the private sector over the past 18 months under Labour. It has been ‘even weaker’ than the sluggish performance for the wider economy.
The survey added: ‘Higher labour costs and the possible impact of the Employment Rights Bill, alongside weak demand, are also causing firms to scrutinise hiring decisions more closely.’
