Keir Starmer used his leaving speech to highlight Labour's achievements, but his economic legacy appears mixed, with sluggish UK growth, higher employment costs, and rising unemployment. The prime minister claimed his government turned around an ailing economy after 14 years of austerity, reversing Tory investment cuts and achieving the highest growth in the G7.
GDP growth under Labour
When Labour was elected in July 2024, Starmer made economic growth the “number one mission.” In early 2024, growth responded to Jeremy Hunt’s pre-election tax cuts, but ended abruptly when Rachel Reeves signaled tax rises to meet Tory budget rules. Growth fell from 0.6% in Q2 2024 to 0.2% in Q3 under Labour.
In early 2025, stockpiling ahead of Trump’s tariffs boosted GDP, but it collapsed in the second half as spending cut speculation hit confidence. A milder autumn 2025 budget without big tax rises revived investment and consumption, yielding 0.6% growth in Q1 2026, making the UK the fastest-growing G7 economy. However, Trump’s strikes on Iran and IMF forecasts predict UK growth slowing to 1% in 2026 from 1.4% in 2025.
Inflation and employer costs
Inflation was 2.2% when Labour took office in July 2024, close to the 2% target. It crept up to peak at 3.8% in summer 2025, driven by higher water bills, vehicle excise duty, and Reeves’s increase in employers’ national insurance contributions. The Bank of England noted that a third of companies raised prices to offset the tax.
Trump’s “liberation day” tariffs in April 2025 pushed up raw material costs, worsening inflation. Effects faded by late 2025, but Trump’s strikes on Iran in late February 2026 triggered an oil price rise, reversing the decline.
Unemployment rises
The unemployment rate rose from 4.3% in July 2024 to 4.9% in the three months to April 2026. Companies blamed higher employment costs from national insurance and enhanced workers’ rights, plus uncertainty from Trump’s tariffs and global instability. Economists also cited AI adoption as discouraging hiring, especially of younger workers.
National debt eases
Reeves feared debt exceeding 100% of GDP. Public sector net debt fell from 99.4% in 2024 to 95.1% in May 2026. Global uncertainty raised concerns about UK vulnerability to trade disputes. The chancellor targeted reducing the annual deficit from over 5% to below 2% to reassure markets, but extra spending on defence, NHS, and welfare has blown this off course.
Interest rate cuts
The Bank of England cut rates six times under Labour, from 5.25% in summer 2024 to 3.75% in December 2025, where it stayed. Mortgages and business loans became cheaper, easing pressure on households and firms. However, expectations of further cuts in 2026 were dashed after the Middle East conflict pushed up oil prices and inflation.
Food parcel deliveries fall
Labour made welfare benefits more generous after ditching the two-child cap and reversing plans to restrict Pip eligibility, following backbench revolts. Children in low-income families gained most. The Trussell Trust reported a fall in emergency food parcel deliveries in 2024 and 2025 as inflation eased, reducing household pressure.
