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3w ago

Chancellor Reeves Faces £57 Billion Fiscal Gap as Growth Forecasts Drop

Economic analysts warn Reeves' fiscal policies are undermining business confidence and growth, with potential tax hikes or spending cuts looming in the autumn.

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Britain's Chancellor of the Exchequer Rachel Reeves speaks during a discussion entitled "Debate on the Global Economy: Growth and Resilience in an Uncertain World," during the 2025 annual IMF/World Bank Spring Meetings in Washington, D.C., U.S., April 24, 2025. REUTERS/Elizabeth Frantz/File Photo
Shoud chancellor Rachel Reeves bust her fiscal rules it would substantially increase the risk of further tax rises and spending cuts at this year’s autumn budget

Overview

  • The National Institute of Economic and Social Research (NIESR) has downgraded 2025 UK GDP growth forecasts to 1.2%, citing domestic policy uncertainty and cost pressures as key factors.
  • Chancellor Rachel Reeves is projected to miss her fiscal rules by £57–63 billion by 2029/30 unless further tax increases or spending cuts are implemented.
  • Reeves' employer national insurance hike has been criticized for slowing hiring and reducing business investment, contributing to weaker growth and lower tax receipts.
  • Businesses are delaying investment decisions due to concerns over potential tax hikes in Reeves' autumn Budget, further eroding confidence in the economic outlook.
  • NIESR and other analysts argue that domestic policies, rather than external factors like U.S. tariffs, are the primary drivers of the UK's subdued economic performance.