Box A: An Alternative UK Economic Forecast

Jane Binner, Huw Dixon, Barry Jones, Logan Kelly and Jon Tepper

National Institute UK Economic Outlook, 2025, issue 17, 11-16

Abstract: The current economic environment in the United Kingdom is fraught with uncertainty, driven by a range of factors: from the geopolitical risks posed by the war in Ukraine, disruptive implications of a second Trump administration in the United States, an expansionary budget, and proposed changes to the planning system for housing and development. These challenges have created an unpredictable economic landscape in the United Kingdom. Our new multi-recurrent neural network forecasts provide fresh insights into key economic variables, including inflation, GDP and UK 10-year gilt yields for the coming year. The models indicate that inflation will rise modestly in the near term before accelerating over the longer run. In addition, GDP is expected to contract slightly in the first quarter of the year, with growth remaining sluggish throughout the remainder of the period. Meanwhile, UK 10-year gilt yields are predicted to experience an initial spike, followed by a period of stabilization. In this article, we present an economic outlook for the period from December 2024 to November 2025, highlighting the latest projections for inflation, GDP, and 10-year gilt yields. We can think of this as an alternative to the NIESR forecasts presented elsewhere in this UK Economic Outlook. We then review our past forecasting performance through a retrospective analysis of our CPI inflation forecasts since May 2024.

Date: 2025
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