The road ahead: 2025 predictions for the UK economy
2025 may seem like a long way away but the next decade could see some dramatic changes in the UK economy and job market.
Using predictive figures from a number of sources, Eleanor O’Neill considers what the worlds of work and finance might look like in the not so distant future.
Digital transformation and urbanisation
Unlike in Marty McFly’s version of this decade, we don’t have hoverboards or flying cars zooming around outside.
What we do have is a changing landscape of urbanisation, digital transformation and widespread advancement that is gradually developing our society and economy across the board.
Following on the trend of recent years, the main drivers of UK growth in 2016/17 will likely continue to be consumer spending and business investment. Rising employment and positive real earnings growth have contributed to a healthy domestic demand.
According to research by PwC, inflation rates should rise toward their 2% target by the end of 2017 and, as such, interest rates are expected to begin a gradual incline toward the end of this period.
On a global platform, UK net exports will hopefully begin a revival of positive GDP contributions as the US and Euro economies improve with the impact of lower oil prices. If there is an international downturn, however, the UK GDP growth could fall close to zero.
An obvious factor in economic developments for the next year will be the implementation of the 2016 Budget.
The end of the deficit
This is the point in time where, should Chancellor George Osborne’s plans come to fruition, the deficit will be wiped out and the UK government will be earning at the same level they spend.
The next General Election is scheduled for 7 May 2020 and a possible change in government makes predictions beyond this date hard to confidently define.
Growth in consumer spending
A key element for future impact to consider is that, according to PwC, consumer spending growth should have gone through a period of some moderation by this time. Despite higher rates of employment, households are expected to become more reluctant to part with their savings.
Automation in the jobs market
The austerity measures that should be in effect until at least 2020, along with advancements in automation, will likely continue to burgeon the practice of downsizing in order to save money.
As a result, around 150,000 jobs could be lost in areas like public administration, defence and social security.
Reduced public sector workforce
It is easy to imagine that beyond five years from now, the actual look and practice of many jobs will be markedly different.
Last month the government announced their intention to reduce their office estate by 75% before 2023, prompting the idea that the traditional work day may be due a face lift.
Changing hiring practices
The Centre for Economics and Business Research (Cebr) predict that by 2022, apprenticeship completions will have contributed £3.4 billion a year to the economy through productivity gains.
Cedefop’s forecasts suggest that by 2023, more than 40% of 30 to 34 year olds will have high level qualifications and account for a significant percentage of the workforce.
This will probably be a direct effect of today’s hiring practices beginning to favour young, skilled employees for new positions.
A stronger UK economy
McKinsey & Co. research indicates that the centre of the global economy will continue on its 'eastward' trajectory due to rapid urbanisation in Asia and other various emerging economies.
Regardless, excepting another recession, most forecasts have the UK in a strong position by the end of the projected decade.
Nesta, for example, has created six possible future scenarios for the 2025 collaborative economy. These include an increased focus on environmental sustainability, local economic development, more international monopolies and the continuation of current trends like micro-entrepreneurship.
Cedefop's predictions show managers, professionals, services and sales jobs making up the majority of the prospective market.
Buoyant business services jobs market
The Office for National Statistics estimates that the UK population in 2025 will have risen to around 70 million.
By this point, a massive three million more jobs could have potentially been created in the UK, leading to a total of 37 million jobs.
According to PwC’s research, the business services sector will see the highest overall rise in employment (2.3%) in 2025, followed by education and health (1.5%).
Growth in financial services jobs will be lower than the average annual jobs growth rate, at just 0.2%.
PwC also suggests that numbers of self-employed workers will continue on an upward slope.
Manufacturing, on the other hand, will probably continue to decline by 2.6% to around two million, in response to the predicted rise of automation and international outsourcing.
What are your predictions for the UK economy? Let us know in the comments below.