As Keir Starmer's tenure as Prime Minister comes to an end, a closer examination of his economic legacy reveals a mixed picture on key indicators. Growth rates have seen significant fluctuations, while inflation has risen above pre-election levels, reaching 3.8% in mid-2025. Meanwhile, the unemployment rate has increased from 4.3% in July 2024 to 4.9% by April, partly due to higher employment costs and adoption of AI by employers.
Economic growth, a central policy goal for Starmer upon taking office in July 2024, experienced a varied trajectory. Following an initial pre-election boost, growth moderated as the Chancellor of the Exchequer, Rachel Reeves, navigated fiscal constraints inherited from the previous administration. Quarterly GDP growth, which was 0.6% in early 2024, dipped to 0.2% in the third quarter under Labour. Subsequent periods saw a rebound, notably in early 2025, partly driven by stockpiling in response to international trade threats, and again in early 2026, where a 0.6% GDP increase made the UK the fastest-growing G7 economy.
Inflation, which stood at 2.2% annually when Labour assumed power, significantly increased, peaking at 3.8% in mid-2025. This rise was attributed to several factors, including higher water bills and vehicle excise duty, alongside an increase in employers' National Insurance contributions, a policy introduced in Chancellor Reeves's first budget. The Bank of England noted that approximately a third of companies raised prices to offset these increased costs.
The UK's unemployment rate also saw an increase under the Starmer government, moving from 4.3% in July 2024 to 4.9% by April. Businesses cited higher employment costs, particularly the rise in National Insurance, and the prospect of enhanced workers' rights as contributors to this trend. Economists also highlighted the increasing adoption of artificial intelligence by employers during this period as a factor discouraging new hires, especially among younger job seekers.
Public sector net debt saw a modest reduction, decreasing from 99.4% of national income in 2024 to 95.1% by May, reflecting efforts to manage government borrowing. However, the period was also marked by significant global economic and political volatility, including the impact of a US administration and escalating international tensions, which posed considerable challenges for the Treasury. Chancellor Reeves often faced speculation regarding the necessity for either further spending cuts or increased borrowing.