THE Labour Government’s flagship economic pledge has been dealt a blow after the Bank of England halved its growth forecast for 2025.
On Thursday, the bank halved its growth forecast for the UK economy to 0.75% for this year, down from previous estimates of 1.5%, before accelerating again in 2026 and 2027.
It also comes amid signs inflation is rising again, with forecasts pointing to a higher-than-expected peak of 3.7% later in the summer.
The downgrade is a blow to Chancellor Rachel Reeves after Labour made growing the economy its number one priority, putting it before tackling child poverty or climate change.
Elsewhere, the bank also cut UK interest rates to 4.5%.
The Bank’s Monetary Policy Committee (MPC) voted for a quarter-point reduction – from 4.75% – after similar cuts in August and November last year, bringing the base rate to its lowest point since June 2023.
Governor Andrew Bailey said the cut will be “welcome news to many” but that the Bank is “monitoring the UK economy and global developments very closely, and taking a gradual and careful approach to reducing rates further”.
Reeves said the interest rate cut was “welcome news” but that she was still “not satisfied” with growth.
She said: “This interest rate cut is welcome news, helping ease the cost-of-living pressures felt by families across the country and making it easier for businesses to borrow to grow.
“However, I am still not satisfied with the growth rate. Our promise in our Plan for Change is to go further and faster to kickstart economic growth to put more money in working people’s pockets.
“That’s why we are taking on the blockers to get Britain building again, ripping up unnecessary regulatory barriers and investing in our country to rebuild roads, rail and vital infrastructure.”
The Conservatives welcomed the cut to interest rates but said Labour’s “disastrous Budget” would likely mean fewer rate cuts this year than expected.
Shadow chancellor Mel Stride said: “This will be welcome news for many families and businesses who have been hit hard by Labour’s mismanagement. Sadly, their disastrous Budget is likely to mean fewer rate cuts this year than previously anticipated.
“Under new leadership, the Conservatives will back business and our nation of entrepreneurs to create jobs and wealth.
“That is the only way to grow our economy so everyone can have a more secure future.”
