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The BritishGDP OBROBRYour browser does not support the element.By Archie Hall, Britain economics correspondent, The Economist economy is running out of excuses. Growth has been sluggish for over a decade. Political chaos after the Brexit referendum of 2016 did not help. The covid-19 pandemic and lockdowns certainly stifled growth—as did the surge in energy prices after Russia invaded Ukraine in 2022, and the rise in interest rates after inflation surged.Now, though, that tumult is over. Inflation is back near its 2% target. Growth picked up in 2024, and forecasts became steadily more optimistic (see chart). Can Britain sustain this in 2025? The backdrop looks good. Interest rates are falling. Politics, at least domestically, is slightly calmer. The new Labour government’s policies are not perfect: its urban-housing targets are not ambitious enough, and adopting the previous government’s “red lines” on Brexit, another growth-dampener, was also ill-advised. But many policies, especially on infrastructure and housebuilding elsewhere, look promising. Plenty could still go wrong. Labour has shown occasional enthusiasm for soak-the-rich tax policies that could hinder efforts to lure investors. A global slowdown would hit a medium-size and open economy like Britain’s very hard. Trade could deteriorate after Donald Trump is inaugurated, though Britain’s skew towards services exports would probably lessen the impact of tariffs on manufactured goods. The most troubling scenario, though, would be if everything goes right yet growth still does not materialise. What if the global environment is stable, the government’s economic plans stay sensible but growth is still tepid in 2025? That would confirm a deeper, more structural growth problem. One worrying data point is that productivity growth was also weak in the otherwise calm years between the global financial crisis of 2007-09 and the Brexit vote in 2016. Overall growth looked better, but was flattered by a demographic boost from women and immigrants entering the job market. It would be a troubling sign if Britain cannot surpass that weak productivity baseline.Labour needs robust growth to boost the tax take and pay for its plans to repair public services without another big increase in borrowing. If the Office for Budget Responsibility (), the debt watchdog, nudged down its estimates of Britain’s trend productivity growth, the government would lose tens of billions of pounds’ worth of fiscal space to borrow. The ’s assumptions are already rosier than those of most forecasters; it would take a lot to raise them, but not much to pull them down. To win re-election in 2029, Labour must show material improvements to the National Health Service, transport, policing, the courts and more. Without growth it will struggle to deliver them.Watch the British economy closely in 2025, then. The initial recovery in growth during 2024 was a pleasant surprise for the economy and for the government. But if it cannot be sustained in 2025, it really will be time to worry.
