UK economy to grow twice as fast as expected this year

The UK economy is on course to grow twice as fast as expected this year, but experts have urged Rachel Reeves to boost investment to maintain this momentum in the long run.
KPMG, the consultancy, forecasts that gross domestic product will expand by 1 per cent this year, up from its previous projection of 0.5 per cent published in July. The economy will then grow by 1.2 per cent next year, revised up from 0.9 per cent.
The better-than-expected growth figures come despite the Bank of England lowering interest rates slowly. KPMG said that the UK base rate will fall once more this year and eventually decline to 3.5 per cent in 2025 from its current level of 5 per cent.
Yael Selfin, chief economist at KPMG UK, said: “The autumn budget represents the first opportunity for the chancellor and the new government to start building the base for stronger growth, one of their principal objectives. It will inevitably require higher levels of public investment.”
In her speech at the Labour Party conference this week, Rachel Reeves, the chancellor, said that the UK would not return to austerity under her watch. She also hinted that more money will be allocated to capital spending and that real public spending will grow.
Reeves has insisted that the Conservatives’s management of the public finances has handed her a £22 billion deficit that requires “difficult decisions” to close at the budget on October 30. She has already made the winter fuel allowance means tested and scaled back a string of investment projects.
Greater caution among consumers triggered by a series of economic shocks in quick succession, such as the Covid-19 pandemic and energy crisis, could constrain demand.
KPMG said: “The significant increase in the proportion of income put aside for savings could be more permanent, influencing consumer spending patterns over the medium to longer term”, adding that consumer spending will increase by just 0.4 per cent this year and 1.4 per cent next year.
Interest rate rises have strengthened incentives for households to save rather than spend over the past two years.