Dramatic economic slowdown means chancellor could face lower receipts and higher borrowing costs in 2025

A dramatic slowdown in economic growth and rising borrowing costs since the budget could undermine the government’s finances and force the chancellor, Rachel Reeves, to U-turn on pledges not to further increase taxes, analysts have warned.

With inflation on the rise again, the London stock market at its lowest point for more than a month and the Bank of England forecasting economic stagnation in the final three months of 2024, the government heads into the Christmas break weighed down by a gloomy outlook for the new year.