UK Set to Become Fifth Largest Global Economy by 2040

The United Kingdom is projected to reclaim its position as the world’s fifth-largest economy by 2040, overtaking Japan in a significant shift amongst advanced economies. According to the Centre for Economics and Business Research, British GDP is forecast to expand from approximately $4 trillion in 2025 to $6.8 trillion by the end of the next decade, marking a substantial economic trajectory despite ongoing structural challenges.

The forecast suggests that anaemic growth prospects in France and Germany will facilitate the UK’s ascent within global rankings. The CEBR’s annual projections indicate that whilst the United States and China will maintain their dominance as the first and second-largest economies respectively, the gap between them will narrow considerably. China’s GDP is expected to reach nearly $48 trillion compared with America’s $53 trillion by 2040, measured in current US dollar terms.

When assessed using purchasing power parity metrics, which account for cost of living differentials and currency fluctuations, China has already surpassed the United States earlier this decade. The think tank now anticipates China will overtake America on current price measures by 2045, representing an acceleration from previous forecasts driven by diminished US growth prospects amid tariff policies and heightened trade protectionism.

India emerges as a significant beneficiary of this global rebalancing, poised to become the third-largest economy by 2040. This represents a remarkable ascent from ninth position at the beginning of 2010, as India surpasses the UK, Japan and Germany. The CEBR maintains that India remains on course to claim the position of world’s largest economy by century’s end, underpinned by demographic advantages and expanding investment.

Germany, currently mired in a shallow recession spanning two years, will retain fourth place, whilst Japan slides to sixth position when measuring GDP at current prices. Nina Skero, chief executive of the CEBR, characterised the shift as a period of gradual rebalancing, with economic influence migrating from heavily indebted Western nations towards smaller Eastern and Southern economies benefiting from younger populations and robust investment growth. Indonesia, possessing the world’s fourth-largest population, is forecast to enter the top ten economies by the start of the next decade, advancing from seventeenth position.

These trends underscore a global economic landscape where resilience varies markedly across regions, with long-term structural shifts in economic influence gathering momentum. The emerging pattern suggests a more dispersed and dynamic international order, challenging traditional centres of economic power.

The projection carries a sobering caveat for British living standards. Despite the expanding aggregate economy, the UK’s ranking in GDP per capita, the primary measure of living standards, is expected to deteriorate from nineteenth globally this year to twenty-first by 2040. Average GDP per head will rise from approximately $57,000 to $89,000 over this period; however, this growth will be outpaced by numerous competitor nations. Luxembourg, Ireland, Switzerland, Singapore and the United States comprise the top five economies when assessed on per capita terms.

The CEBR anticipates global economic growth will decelerate to 2.5 per cent next year, constrained by elevated tariff rates in the United States reaching levels not witnessed in a century. The forecast warns that elevated uncertainty stemming from shifts in global trade architecture, particularly US tariff increases, has weighed materially on economic activity.

Near and medium-term challenges remain evident across numerous economies, including over-indebtedness, above-target inflation, constrained fiscal flexibility and ageing demographic profiles. US-imposed tariffs and geopolitical tensions serve to exacerbate these structural headwinds, creating a complex environment for policymakers and investors navigating the evolving global economic landscape.