UK Economy To Grow 1.0% In 2025; Sentiment Improves Slightly

• Britain's economy will grow a bit faster this year than thought a month ago, a Reuters poll of economists predicted, partly due to unexpectedly strong growth in the first quarter that was not expected to persist.
• Sentiment has improved following a basic trade deal with the United States, which still leaves a 10.0% tariff on British goods but lowers duties on cars and steel. Economists surveyed do not expect it to make much difference to growth.
• A strong minority of economists who contributed to both this month's and last month's polls, 22 of 50, raised their growth forecast for this year by 25 basis points on average, with the median at 1.0% versus 0.9% expected in April. It was the first median upgrade in five months.
• "The UK government is massively increasing spending this year. There's a lot of money coming in and that's going to act as a bit of a tailwind as well. Real wage growth is also still quite strong, so the economy still has some reasonable underpinnings", said James Smith, economist at ING.
• The Bank of England is expected to stick to one interest rate cut per quarter, with the next likely in August and then in November, ending the year at 3.75%. Still, economists and markets are braced for inflation to rise well above the BoE's 2.0% target before easing back by the middle of next year.

(Source: Reuters)