Rachel Reeves has been dealt a major blow by Wall Street firm Morgan Stanley, after it slashed for 2025.
The timing is humiliating for and the government, coming just two days before she is set to deliver a major speech setting out her latest plan to boost growth.
The US investment giant previously predicted the UK economy would grow by 1.3% in 2025.
However this morning they slashed this to an even gloomier 0.9%, nowhere near the Government’s manifesto pledge to secure the highest growth in the G7.
Ten days ago the IMF said Britain is only on course to be the third-fastest growing G7 country, however this was on a much more optimistic forecast of 1.6% – 0.7 points higher than Morgan Stanley set out this morning.
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The news is yet another blow for Rachel Reeves (Image: Getty)
The news comes amid growing gloom from businesses following the Chancellor’s hated decision to whack up National Insurance in her first Budget, a move already threatening to increase unemployment.
Morgan Stanley said: “While the peak impact of the BoE’s policy tightening is likely behind us, its drag on the economy still persists.”
Ms Reeves is set to deliver a major speech on Wednesday setting out her latest plans to boost growth.
The speech is set to include major changes to Britain’s planning regulations and possibly confirm that the Government will press ahead with building a third runway at Heathrow, a move already threatening civil war in the Labour Party.
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The City is gloomy about Britain’s economic prospects (Image: Getty)
At the weekend an advisor to Ms Reeves claimed she is becoming “very impatient at the pace of change”, and is set to demand an end to the culture of reviews and consultations that have dominated Labour’s first seven months in power.
Ahead of the Spring statement, an official said: “We need to be able to show in March that no matter what it says, we are pulling every lever available.”
“The speech won’t just be setting out a vision, there has to be very specific measures not just in the speech but over the weeks after that.”
Speaking to Laura Kuennsberg on Sunday, Ms Reeves said: “We are getting on and delivering, that will be good for investment and trade in our country and also good for families wanting to go on cheaper holidays as well.”
Questions remain about whether the Government will cave into EU pressure and join a new customs deal with the bloc in order to secure growth, but risk sparking a major row about whether they’re reversing .
She said on Sunday: “We are absolutely happy to look at these different proposals because we know that the deal that the previous government secured is not working well enough.”
“It’s not working well enough for small businesses trying to export, it’s not working well enough for larger businesses either. We’re grownups who admit that, whereas the previous government said there were no problems at all”.