As we navigate the ever-changing landscape of the global economy, it’s refreshing to hear a positive outlook for the year ahead. At our recent annual event with HSBC at Tewkesbury Park Hotel, the economic briefing by economist Chris Hare titled ‘Reasons to be Cheerful’ provided a surprisingly optimistic forecast for 2025. Here, we share key insights from Chris’ presentation and what they mean for businesses across the UK.
The briefing highlighted several factors contributing to this upbeat perspective: increased government investment, higher government spending, rising business investment, and the potential for increased private consumption. Collectively, these elements are expected to drive economic growth of 0.75% to 1% for 2025. While this may seem modest, it reflects a resilient and adaptable economy in the face of ongoing challenges.
One of the central themes of the briefing was the importance of business and consumer confidence. The economic outcome for this year will heavily depend on how confident businesses and consumers feel about their financial prospects. With wage growth continuing to outpace inflation, partly due to statutory increases in the minimum wage, there is hope that people will perceive this as a real increase in spending power, which in turn could boost consumer confidence and drive economic activity.
However, the presentation also underscored the importance of remaining vigilant about international developments, particularly in the United States. Proposed tariffs from the US and policies under Donald Trump’s administration could impact inflation both domestically and globally. Typically, global instability tends to strengthen the US dollar, and given that the UK is more closely aligned with the dollar than the euro, this could have significant implications for our economy. In April, we will learn whether tariffs will be increased for the UK. While a 10% tariff might be manageable, a 25% tariff could have a more pronounced impact.
For businesses like ours, navigating these changes is crucial. The biggest challenge we face is balancing wage growth with inflation. During the briefing, several strategies were discussed, including passing National Insurance costs onto customers through higher prices, reducing margins, implementing smaller pay increases, and considering redundancies if necessary.
As we move forward into 2025, it’s clear that adaptability and strategic planning will be key. By staying informed about economic trends and prepared to adjust our approaches, we can position ourselves to thrive in this evolving landscape. Let’s embrace the positive outlook and work together to make the most of the opportunities ahead.
