United Kingdom

Gradual growth thanks to public spending

The UK economy is expected to grow at a modest pace in 2025, driven by strengthening household consumption and increased government spending and investment. While unemployment is projected to edge higher, strong nominal wage growth should help sustain purchasing power. However, a renewed rise in inflation could erode some of these gains and may limit the Bank of England’s ability to cut rates more aggressively. Still, interest rates are expected to decline, with the base rate likely ending the year closer to 4%.

Government expenditure and investment will be key growth drivers, with the Autumn budget expanding both day-to-day spending and planned infrastructure and housing projects, supported by policy changes. However, much of this stimulus is financed through higher corporate taxes, which could weigh on private investment. Meanwhile, exports are expected to see a modest recovery, led by stronger service exports, while goods exports remain constrained by weak demand from the UK’s main trading partners, the EU and US.

Corporate insolvencies fell by nearly 5% in 2024 but remain elevated, including older, more established companies. While insolvency levels are expected to stabilise or ease slightly in 2025, many businesses continue to struggle with high costs – particularly for labour and energy – posing a downside risk to the outlook.

Tight public fiscal situation should slightly improve

In 2025, the fiscal deficit is expected to narrow slightly, driven by increased tax revenue from higher wages and a rise in taxes (such as the employer national insurance contributions). However, government spending is set to rise as outlined in the Autumn budget, funded partly through these tax increases and additional borrowing. As a result, public debt as a share of GDP is projected to continue its upward trajectory. The Bank of England is expected to continue with quantitative tightening in 2025, reducing its government bond holdings by an additional GBP 100 billion between September 2024 and September 2025. This will primarily occur through letting bonds mature rather than active sales, with around GBP 80 billion in bonds set to mature over the period.

The UK's current account deficit is expected to show some improvement in 2025, as the continued surplus in services partially offsets the persistent goods trade deficit. Service exports are likely to remain strong, supported by the UK’s global strength in finance and professional services, as well as a favourable exchange rate due to a strong dollar. Meanwhile, rising private consumption is expected to drive imports higher. The gradual introduction of border checks in 2024 – including physical inspections and declarations – along with the full implementation of live animal checks, the Entry/Exit System (EES), and ETIAS in 2025, are expected to add some friction and increase trade costs between the UK and the EU. However, the overall economic impact is likely to be limited.

Busy legislative agenda in 2025

The Labour government is facing a decline in popularity, with recent polls showing a 10-point drop when comparing the beginning of 2025 to the election in July 2024 and Prime Minister Keir Starmer’s net approval rating sliding from +28 post-election to -32. Despite this, Labour maintains a comfortable majority of over 75 seats in Parliament. The government has a busy legislative agenda in 2025, including a labour market reform, an updated planning bill, and the final industrial strategy (alongside a spending review). While labour market reforms are expected to raise business costs, the planning bill and industrial strategy could help boost investment and economic activity – though any meaningful impact is more likely from 2026 onwards than in the very short term.

The UK is also navigating an increasingly complex geopolitical landscape, balancing its relationship with the United States while seeking closer ties with the European Union. Unlike many countries, the UK maintains a relatively balanced goods trade with the US, with exports primarily in services, making it less exposed to potential tariffs. However, the government is keen to strengthen trade and security ties with both partners, with enhanced defence collaboration expected to serve as a symbol of improving UK-EU relations. This comes at a pivotal time, as the UK is set to increase defence spending over the next few years.

Payment

Cheques are still used for domestic and international commercial payments, although bills of exchange and letters of credit are preferred for international transactions. Bank transfers – particularly SWIFT transfers ? are also often used and are viewed as a fast and reliable method of payment. Direct Debits and Standing orders are also recognised as practical solutions for making regular or anticipated payments and are particularly widely used in domestic transactions. It is acceptable to issue invoices both before and after the supply of goods or services.

Debt Collection

AMICABLE PHASE

The debt collection process usually begins with the debtor being sent a demand for payment, followed by a series of further written correspondence, telephone calls and (if the value of the debt permits), personal visits and debtor meetings. The collection process has been designed as a progression of stages, beginning with an amicable (pre-legal) collection phase and escalating up to litigation, should the debtor fail to meet his obligations.

LEGAL PROCEEDINGS

The County Court only has civil jurisdiction. Judges handle claims for debt collection, personal injury, breach of contract concerning goods or property, land recovery and family issues (such as divorce and adoption). Cases valued at less than GBP 25,000 (or under GBP 50,000 for personal injury cases) must have their first hearing in the county court.

The High Court is based in London, but also has provincial districts known as “District Registries” all over England and Wales. It has three divisions: the Queen’s Bench Division, the Chancery Division, and the Family Division.

The Court of Appeal has two divisions – the Civil Division and the Criminal Division.

The Supreme Court is composed of a president, a deputy president, and twelve professional justices.

Fast-track proceedings (Summary Judgments)

In order to apply for a summary judgment, the claimant must obtain an Application Notice Form from the court. This should be supported by a Statement in which the claimant sets out why he believes that summary judgment should be given ? either because the defendant has no real prospect of successfully defending the claim, or because there is no reason why the case should be decided by a full trial.

A copy of this statement is served on the opponent seven days before the summary judgment hearing. The opponent also has the opportunity of presenting a statement, but this must be sent no later than three days before the hearing. The claimant cannot apply for summary judgment until the debtor has either returned an acknowledgment of service form, or has filed a defence. If the court agrees with the claimant, it will return a favourable judgment. The application will be dismissed if the court does not agree with the claimant.

Ordinary proceedings

There are now identical procedures and jurisdictions for the County Court and the High Court. A number of litigation “tracks” have been created, each with their own procedural timetables. Claims are allocated to a track by a procedural judge, according to their monetary value. There are transaction processes that need to be followed before initiating a court action. These processes have been designed to encourage the parties concerned to settle disputes without the need for court proceedings, thus minimising costs and court time.

Proceedings formally commence when the claimant (formerly “the plaintiff”) files a Claim Form with the County Court or the High Court. Full details of the complaint are set out in the Particulars of Claim, which is usually a separate document which supports the Claim Form. The Claim Form must be served on the defendant by the court, or by the claimant. The defendant can then respond to the claim form within 14 days of service. A time extension of 28 days is agreed for the debtor to file a defence and/or a counter-claim. Once these formal documents have been exchanged, the court orders both parties to complete an “Allocation Questionnaire”.

Freezing order (formerly Mareva Injunction)

A freezing order (or freezing injunction) is a special interim order which prevents the defendant from disposing of assets or removing them from the country. One of the conditions attached to the granting of such an order is often that the applicant will pay full costs to the person against whom it was made, if it turns out to be inappropriate. A typical commercial dispute can take 18-24 months to reach a judgment, starting from the time legal action is first initiated.

Enforcement of a Legal Decision

A number of enforcement mechanisms are available. These include the Warrant of Execution (which allows a County Court Bailiff to request payment from the debtor) and the Writ of Fieri Facias for debts exceeding GBP 600, under which a High Court Enforcement Officer can make a levy on goods to the equivalent value of the judgment debt (for subsequent sale at auction and offsetting against the amount due).

As a member of the European Union, the UK has adopted several enforcement mechanisms for decisions rendered in other EU countries. These include EU payment orders which are directly enforceable in domestic courts and the European Enforcement Order, for undisputed claims. Judgments issued in non-EU countries are recognised and enforced if the issuing country has an agreement with the UK. If no such agreement is in place, an exequatur procedure is provided by English Private International?Law.

Insolvency Proceedings

ADMINISTRATION

Administration is intended as a rescue mechanism which enables companies (wherever possible) to continue with their business operations. The procedure is initiated either by applying to the court for an administration order, or by filing papers with the court documenting the out-of-court appointment of an administrator.

COMPANY VOLUNTARY ARRANGEMENT (CVA)

The CVA is an informal but binding agreement, between a company and its unsecured creditors, in which the company’s debts are renegotiated. It can be used to avoid or support other insolvency procedures, such as administration or liquidation. It provides for a restructuring plan which imposes the support of dissenting creditors.

CREDITOR’S SCHEME OF ARRANGEMENT

The Creditor’s Scheme of Arrangement is a court-approved compromise or arrangement, between a corporate debtor and all classes of its creditors, for the reorganisation or rescheduling of its debts. It is not an insolvency procedure and does not include a moratorium on creditor action. It can, however, be implemented in conjunction with formal insolvency proceedings, (administration or liquidation). It can also be implemented on a standalone basis by the debtor company itself.

RECEIVERSHIP

There are three types of receivers. The first of these is a receiver appointed with statutory powers. The second type of receiver is one who is appointed under the terms of a fixed charge or a security trust deed. The third category is an administrator (who is appointed under the terms of a floating charge over all, or a substantial share, of the debtor company’s property.

LIQUIDATION

A company can enter voluntary or compulsory liquidation. Voluntary liquidations can be either a “members’ voluntary liquidation” or a “creditors’ voluntary liquidation”. Both of these proceedings are initiated by the company itself, by passing a resolution during a meeting of members. The company then ceases trading and a liquidator collects the company’s assets and distributes the benefits to the creditors so as to satisfy, as far as possible, the company’s liabilities.

Last updated: March 2025