New long-term projections released on Tuesday have suggested that the UK will emerge as the leading major economy in Europe over the next 15 years, with an anticipated growth surpassing France and closing in on Germany.
The Centre for Economics and Business Research (CEBR) forecasts that Britain's GDP growth will stabilize between 1.6 percent and 1.8 percent until 2038. This growth trajectory is expected to help the country keep its standing as the world's sixth-largest economy.
According to CEBR, UK output would surpass France's by 10.2 percent this year, despite both being at similar levels 15 years ago. The report indicates that Britain would lead over France by almost 19.9 percent in 2038.
The CEBR predicts that Germany will continue to be Europe's largest economy. However, its lead over the UK is expected to decrease slightly from 32.5 percent this year to 28.8 percent by 2038. This narrowing disparity will be driven by a deceleration in Germany's growth as the country continues to depend on Russian energy supplies to fuel its manufacturing sector.
While Germany could resume economic growth in 2024, this growth is anticipated to decelerate progressively leading up to 2038. The country is also expected to lose its ranking as the third-largest economy to Japan in 2026 and slip to the fourth position behind India by 2027.
"The fundamentals of the UK economy are still very much strong. London's status as a financial and advisory services hub enduring, along with the wider strength of the services sector across the UK, will push UK growth," said Pushpin Singh, senior economist at CEBR, in an interview with Bloomberg.
The recent forecasts also anticipate the UK's emergence from a prolonged economic downturn marked by Brexit and a series of upheavals, including the pandemic and significant inflationary pressures. Singh believes the impact of Brexit has been exaggerated or unexplored.
Britain's economy has suffered sluggish productivity growth since the financial crisis. On top of that, it is also struggling with emerging labor supply issues in recent years. This led the Bank of England to adopt a more pessimistic outlook regarding the country's growth prospects in the forthcoming years.
While the growth outlook for the UK and Europe appears restrained, the anticipation of potential tax reductions and interest rate cuts in 2024 has sparked optimism for an acceleration in the British economy.
Chancellor Jeremy Hunt has revealed that impending National Insurance cuts are set to take effect next month. As inflation declines from its 2021 peak of 11.1 percent to the current 3.9 percent, there's widespread anticipation that the Bank of England will initiate interest rate reductions next year from a 15-year high of 5.25 percent. The first cut might occur as early as March, potentially leading to rates plummeting to around 3.75 percent by the conclusion of 2024.
An outlook of other economies
According to predictions, India is poised to become the globe's third $10 trillion economy by 2035. Economists foresee this transformation leading to a shift in global geopolitics as three superpowers vie for influence instead of two.
In contrast, Russia has plummeted in its ranking due to economic sanctions imposed after its Ukraine invasion. From ranking eighth in 2023, it is projected to drop to the 11th position in 2024 and further decline to 14th by 2038. Economists caution that this forecast remains highly uncertain.
China's economy continues to grow despite a challenging outlook for its property market. However, new projections indicate that it will not surpass the U.S. as the world's largest economy until 2037, contrasting to initial estimations that China will do so in 2036.
Following this, the CEBR forecasted that the U.S. would surpass China again in the 2050s and that three decades later, India would ascend to become the world's largest economy in the 2080s.