The UK economy enters 2025 on uncertain footing, with businesses and consumers bracing for the effects of new fiscal policies and global economic headwinds.

The UK economy faces stagnation in 2025, weighed down by new employer National Insurance contribution hikes, subdued consumer confidence, and tepid growth in key industries like automotive and hospitality. Businesses must also adapt to rising costs, AI integration, and potential trade disruptions from U.S. tariffs. Inflation, projected to stay above the Bank of England's target, limits room for monetary easing. Still, sectors like housing may see gradual recovery, and employment remains robust, offering some resilience amid a challenging landscape.

Business, the economy and the pound in your pocket - what to expect from 2025 (Sky News)

1. Explain the global economic headwinds that the UK economy is likely to face in 2025.
2. Discuss the factors that are likely to cause UK consumer confidence to be subdued in 2025.
3. Discuss the extent to which macroeconomic policy tools can be used to improve the economic outlook for 2025.