UK Faces Stagnant Living Standards and Economic Uncertainty in 2025

Chancellor Rachel Reeves prepares for a challenging spending review as growth projections falter and living standards show limited improvement.

The UK economy contracted for two consecutive months in late 2024, with zero GDP growth expected through the end of the year, raising concerns about a potential recession.
Independent forecasts for GDP growth in 2025 average 1.3%, below the Office for Budget Responsibility's 2% projection, creating pressure on public finances due to lower tax revenues and higher costs.
The Resolution Foundation predicts that real living standards will decline for higher-income households and stagnate for many others, with the poorest hit hardest by rising housing costs, council tax hikes, and social security cuts.
Chancellor Rachel Reeves is banking on improved public services to offset financial stagnation, as her government faces a tough spending review requiring departments to find 5% efficiency savings.
Experts warn that failure to achieve significant economic growth could force difficult decisions on taxes and spending, with limited fiscal flexibility available for future plans.