Investors may have anticipated that the UK Budget would serve as a catalyst for growth in 2025. However, the reality of the Chancellor's plans could be very different.
Speaking on Investment Week's Investment, Talks Outlook 2025 Q&A, senior economist at Schroders, George Brown, painted a concerning picture of the UK economy's current state as it struggles to maintain momentum amidst slower growth and a weakening labour market. This trend is expected to intensify due to forthcoming changes in National Insurance rate.
"At the same time, we see wage growth and surface inflation remain stick. We are really between a rock and a hard place. There is not a lot of places for the UK Chancellor to move [in terms of spending and tax rises]."
If the market shifts towards a higher-rate environment in 2025 or early 2026, as forecast by Schroders, the economic situation is likely to worsen. In this scenario, the Chancellor may be forced to adopt a strategy of curbing expenditure, which, although necessary, may face significant political opposition in the short term.
When it comes to investing in the UK economy, Brown suggested that investors may benefit from focusing on global players with a significant presence in the US market. The economist noted that as pessimism surrounding Donald Trump begins to dissipate, companies operating at a global scale could reap the benefits of a continued strong US economy.
Watch Investment, Talks Outlook 2025 Q&A in full below
