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\t\tInvestec has lifted its UK economy growth forecast.\t<\/p>\n\t\t\tFriday 29 August 2025 3:32 pm\n\t\t\t<\/p>\n
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\t\tInvestec has lifted its UK economy growth forecast.\t<\/p>\n
Global banking firm Investec has lifted its growth projections for the UK economy with another interest rate cut<\/a> pencilled in for 2025.<\/p>\n The financial services company expects the UK economy to grow 1.5 per cent this year and 1.6 per cent in 2026. This trumps the Office for Budget Responsibility (OBR<\/a>) forecast, which expects the economy to grow one per cent this year. <\/p>\n It comes after \u201cslightly firmer\u201d GDP data, which has provided the government a modest boost.<\/p>\n Data from the Office for National Statistics (ONS) showed the UK economy grew 0.4 per cen<\/a>t in June \u2013 an unexpected turnaround after tariff and tax uncertainty clouded the period.<\/p>\n A Bloomberg poll of economists had predicted a 0.1 per cent rise prior to the release.<\/p>\n As a result, Investec economists said they \u201cjust about stick to [their] call\u201d of an interest rate cut in November. <\/p>\n Markets had priced a 50 per cent chance of an interest rate cut being made at the Bank of England\u2019s next meeting but fresh inflation data earlier this month slashed expectations.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBank of England may face lower inflation despite \u2018Oasis bump\u2019<\/a><\/p>\n The Bank of England\u2019s early August forecast correctly predicted inflation in July would be 3.8 per cent leading to economists expecting a hawkish vote in November.<\/a><\/p>\n Investec: Better growth eases tax fears<\/p>\n If growth meets these forecasts, Investec economists said \u201cthe OBR may yet hold off cutting its own forecasts too, meaning fewer tax rises may be needed than feared.\u201d<\/p>\n Some economists have suggested Chancellor Rachel Reeves will be staring down a \u00a350bn black hole<\/a> come the 2025 Autumn Budget.<\/p>\n This comes after U-turns from the Labour government derailed savings opportunities that the Chancellor had relied on. Reeves had hoped to shed \u00a35bn in welfare spending through reforms but a rebellion from back benchers led to a policy row back.<\/p>\n Following the government\u2019s Spending Review, where Reeves splurged \u00a3190bn across public services, economists warned of future tax hikes of over \u00a320bn.<\/p>\n KPMG\u2019s chief UK economist, Yael Selfi<\/a>n, said a growth forecast of just\u00a01.2 per cent\u00a0<\/a>would lead to public sector revenues falling below Reeves\u2019 expectations given an increase in the cost of borrowing due to high gilt yields and a stalling in interest rate cuts.\u00a0<\/p>\n \t\t\t\t\tRead more<\/p>\n