UK economy review: 2025 and the road ahead

Local TV

Many households are still feeling financial pressure as prices, wages and interest rates move at different speeds. We look back at how the UK economy performed in 2025 and what could lie ahead for families and businesses in 2026.

Transcript

00:00The average man, woman and child to some extent, you know, what they're looking at is the amount

00:05they have to pay for the things that they consume are going up and the amount that they've got

00:09coming in is not going up as fast and so there is a sort of a cost of living crisis. Now inflation

00:15is coming down but not enough. We're probably going to see interest rates come down maybe a

00:21couple of sort of quarters in 2026 which will sort of perhaps alleviate the sort of the problems

00:27as sort of for mortgage holders although because most people are on sort of fixed rates of course

00:31the difficulty is somebody coming off a fixed rate presently is having to pay more because

00:35the sort of the rates are far higher than they were maybe when they took them out say five years ago.

00:39For many people the pressure is being felt most sharply in day-to-day spending. Prices for essentials

00:46remain elevated while wage growth has struggled to keep pace. Even as inflation cools, borrowing costs

00:52are still biting particularly for those coming off fixed rate mortgages. That imbalance continues to

00:58shape how confident households feel about their finances. So what is required well you know is to

01:04sort of a thriving economy where you've got a lot of money that you can spend on sort of the infrastructure

01:10getting sort of goods and sort of people moving around in such a way as of course there's much more

01:15dynamism. I think the big problem we've still got in this country we're very dependent upon sort of

01:19imports for everything that we sort of buy and of course that means we're sort of uh subject to

01:23sort of the markets going up and down and we've seen this sort of most recently sort of fuel um

01:28oil of course is the sort of the um the thing which of course drives our sort of cars but also gas

01:33which of course heats our homes and you know that the the transition to net zero is part of the the

01:38challenge if you feel like we're trying to get away from sort of uh fossil fuels but you know in the

01:43interim we're sort of uh very dependent upon the sort of the international prices so hence the sort of the

01:48prices go up and we have less money um whether people are going to sort of feel happier comes

01:53at the end of 2026 than they are at 2025 is um is you know it's a question to sort of uh that the

02:00remains open i suspect not you know but people sort of like to moan um and dare i say they have good

02:05reason at present the challenges don't stop with household budgets businesses are also navigating higher

02:11costs and uncertainty which can affect hiring and investment decisions sectors that rely on

02:17consumer spending are especially exposed when confidence dips all of this feeds back into

02:23the wider economy influencing growth tax revenues and how much the government has to spend in the years

02:29ways ahead

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