Challenges Facing British Companies in 2025

By Suban Abdulla
LONDON (Reuters) – British companies are bracing for a tough 2025, according to the British Chambers of Commerce (BCC). An increase in employment costs and potential tariffs on exports could significantly impact investment and trading prospects.

The BCC highlighted the risk of higher trade tariffs, especially with incoming U.S. president Donald Trump proposing blanket tariffs ranging from 10% to 20% on nearly all imports, alongside ongoing global conflicts. These factors, compounded by post-Brexit trade barriers with the European Union, may hinder trade.

David Bharier, the BCC's head of research, noted, "With fears of a tariff war and continued trade barriers with the EU, international trade will be challenging for many firms."

The BCC has revised its forecasts, predicting a contraction in net trade by 1.4% in 2025 and 1.5% in 2026. Earnings growth is anticipated to slow, affected by increased costs such as higher social security contributions and a 6.7% rise in the minimum wage, both taking effect in April.

Bharier also mentioned that rising business costs might limit wage growth and employment in the short term as firms struggle to manage costs while boosting recruitment. The Bank of England is monitoring wage growth closely, as it hints at gradual interest rate cuts due to ongoing inflation pressures in the economy.

Business investment is expected to grow by only 0.9% next year, down from a previous forecast of 1.4%. Growth for 2026 is expected to reach 2.1%.

The BCC attributes this downgrade to the increase in social security contributions, as noted by finance minister Rachel Reeves in her October budget.

The BCC now projects Britain’s economy will grow by 0.8% in 2024, down from an earlier forecast of 1.1%. However, growth estimates for the next two years have improved, with expected expansions of 1.3% in 2025 and 1.5% in 2026, which surpass previous estimates of 1.0% and 1.1%, respectively, following Reeves' announcements on public spending increases.

Additionally, the Organisation for Economic Cooperation and Development (OECD) has slightly downgraded its forecast for British economic growth this year to 0.9% from 1.1% but has raised the 2025 projection to 1.7% from 1.2%.