Rachel Reeves’ Budget to blame for economy slump, bombshell report warns | Politics | News
Rachel Reeves’ “annus horribilis” was completed today; A major report has blamed Britain’s nightmare budget for its “average” economic performance. The Chancellor’s tax raid in November means GDP forecasts for the next five years.
In the next blow, the UK is predicted to fall below Finland and Belgium in the latest GDP per capita global rankings. Our crumbling economy means the UK will drop to 22nd place by 2030, according to the influential Center for Economics and Business Research.
The findings are particularly embarrassing for Sir Keir Starmer because he uses the measure as a way of assessing his promise that “working people will have more money in their pockets”.
Shadow Chancellor Sir Mel Stride told the Daily Express: “As we bid farewell to 2025 – undoubtedly Rachel Reeves’s annus horribilis – I urge the Chancellor to change course in 2026. It is not too late to put the country ahead of your own political survival.”
In a bleak assessment of the last 12 months, the CEBR said Labor had achieved little in its first full calendar year in government.
“There has been only very limited success because they were elected on a platform to accelerate growth,” he says.
“The government’s policy announcements in the Autumn Budget 2025 did little to support the short-term growth outlook.
“Therefore, over the next five years, the annual GDP growth rate is expected to remain below average at 1.5% per year.”
It is the latest damning indictment of Ms Reeves’s handling of the economy, which has put her under intense pressure with growing demands for her removal from office in 2025.
CEBR’s World Economic League 2026 Chart states that the UK has one of the fastest growth rates in the G7, although it is noted that this is “far behind historical trends”.
The report draws attention to the high inflation rate in the UK, which is expected to be 3.4% on average in 2025, due to the impact of rising energy and food prices.
It is also stated by Ms Reeves’ employers that last year’s National Insurance increase increased unemployment.
Despite the pessimistic assessment, the UK is expected to improve its WELT ranking, overtaking Japan to become the world’s fifth largest economy and closing the gap with Germany.
The Treasury said more work needed to be done, but noted other forecasts that had been “challenged” in the last 12 months.
A spokesman said: “We have defied forecasts this year with the OBR, Bank of England, IMF and OECD raising their growth forecasts, inflation is also falling faster than expected and real wages have risen more since the election than in the first decade of the previous government.
“But we know there is more to do, which is why we are protecting record investment in our infrastructure and supporting major planning reforms, the expansion of Heathrow and Gatwick airports and the construction of Sizewell C.
The report comes just days after official figures showed Britons had become poorer this year.
ONS data has revealed that per capita wealth will fall to zero by 2025, leaving many households in dire straits.
Additionally, Real Household Disposable Income (RHDI) per capita fell 0.9% in the first quarter and 0.8% in the third quarter, representing an overall decline of about 1.7% so far this year.
Reform UK deputy leader Richard Tice also criticized Labor for “taking the British public on a festive horror ride”.
“Labor is increasingly dragging the UK economy down: jobs are collapsing, growth is disappearing and confidence is diminishing,” he added.
Cebr Chief Executive Nina Skero said: Donald Trump‘s tariff attack has had a major impact on the global economy this year.
“As global growth slows, wide-ranging differences in economic performance are becoming more apparent, indicating a gradual rebalancing of economic strength,” he said.
“Europe has been at the forefront of many of these struggles and has seen growth rates fall as a result.”
The full effects of the latest major Budget raid are yet to be felt.
Last week, the Bank of England announced that it expected growth to remain stable in the last three months of 2025 by reducing interest rates from 4% to 3.75%.
Matt Swannell, chief economic advisor at EY Item Club, said: “Real household income growth is currently slowing sharply and the household savings rate remains high by historical standards, although it fell in the third quarter.”
The UK will enter 2026 amid a sharp economic downturn in the private sector after companies “put the brakes on” investment and hiring ahead of the autumn budget, business leaders have warned.
Private sector output is on track to fall in the fourth quarter of 2025, the Confederation of British Industry (CBI) said in a bleak outlook after months of tax speculation.
The lobby group’s latest growth indicator showed a decline in activity across all sectors of the economy was reported in the three months to December, suggesting the budget had done little to improve bosses’ mood.
Separate figures from job site Adzuna showed that the number of job vacancies in the UK fell for the fifth consecutive month in November. The job site, which reported a 6.4% month-on-month decline in new openings, said 2025 is “one of the most challenging years for job seekers since the pandemic.”
