According to KPMG, the UK economy is forecasted to grow, with GDP now predicted to rise by 1% in 2023. This is an increase from the earlier estimate of 0.5%. Growth is expected to continue into next year at 1.2%, revised from 0.9%. Despite the slow reduction of interest rates by the Bank of England, expectations are that the base rate will decline to 3.5% by 2025 from its current 5%.
Yael Selfin, KPMG UK's chief economist, emphasized that Chancellor Rachel Reeves must utilize the upcoming autumn budget as a chance to enhance growth through public investment. Reeves has reiterated that there will be no return to austerity, suggesting plans for increased capital spending and a rise in real public spending, which could be crucial for economic recovery.
KPMG has noted potential challenges ahead, particularly the cautious nature of consumers affected by economic disruptions such as the Covid-19 pandemic and the energy crisis. As a result, consumer spending is predicted to grow only by 0.4% this year and 1.4% next year, as many households focus on saving rather than spending.
During the Labour Party conference, Reeves recognized the difficulty of addressing a £22 billion deficit left by the previous Conservative government, underscoring that her upcoming budget decisions will involve some "difficult choices" to steer the economy towards more robust growth.
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