Chancellor Rachel Reeves has faced a fresh blow ahead of her inaugural budget after economic growth forecasts were downgraded.

The UK budget, due to be delivered on Wednesday October 30 is expected to include around £40 billion worth of savings.

It is thought a potential rise in employer national insurance contributions could be included, with the Chancellor facing calls to guarantee workers will not be hit by the increase.

That could raise around £15.4 billion amid warnings of a £22bn black hole in the public finances.

Ahead of the budget, Ms Reeves has insisted any plans outlined will lead to economic stability.

But senior economists at the EY Item Club previously predicted the UK would record 1.1% growth for the year ahead.

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However, the latest quarterly economic forecast, published on Wednesday, has instead estimated the UK's gross domestic product (GDP) will increase by just 0.9% in 2024.

It is thought cautious consumer spending could lead to the decrease.

Guidance for the following year has also been downgraded, with growth predicted to improve to 1.5% in 2025, down from a 2% forecast made in July.

Ms Reeves is in Washington D.C ahead of the budget for her first International Monetary Fund (IMF) Annual Meetings.

She will represent the UK in G7, G20 and IMF discussions on the global economy and ongoing support for Ukraine.

But she is also set to tell world leaders that the upcoming budget will "invest in the foundations of future growth".

Ahead of her speech in the US, she said: "A Britain built on the rock of economic stability is a Britain that is a strong and credible international partner.

"I'll be in Washington to tell the world that our upcoming budget will be a rest for our economy as we invest in the foundations of future growth.

"It's from this solid base that we will be able to represent British interests and show leadership on the major issues like the conflicts in the Middle East and Ukraine."

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But Matt Swannell, chief economic adviser to the EY Item Club, said: “Following last year’s technical recession, a strong start to 2024 helped establish the UK’s recovery and a return to steady growth is forecast for next year.

“However, lower household savings has reduced the scope of potential consumer spending and sticky inflation means that interest rate cuts are set to occur at a gradual pace.

“This means that growth in 2025 wont be as robust as it could have been.”

It said the downgrades are largely linked to household savings, which are weaker than initially thought three months ago and causing consumers to restrict some spending habits.

Meanwhile, deputy prime minister Angela Rayner avoided questions on rumoured tax rises and the impact they could have on working people.

Labour’s manifesto stated the party would not increase taxes on working people and included commitments not to increase national insurance, income tax or VAT.

Prime Minister Sir Keir Starmer has previously said his government will keep its “manifesto pledges”.

Ms Rayner, who was standing in for the Prime Minister while he visits the Commonwealth Heads of Government Meeting in Samoa, was quizzed by shadow deputy prime minister Sir Oliver Dowden on the definition of a “working” person.

Sir Oliver said at Prime Minister's Questions: "The deputy prime minister stood on a manifesto promising not to raise taxes on working people. It now appears she can't even define who working people are."

"There are five million small business owners in this country. Are they working people?" he asked.

Ms Rayner replied: “I don’t know how the shadow deputy prime minister can stand there with a straight face when it was the small businesses, the working people of this country, that paid the price for them crashing the economy, sending interest rates soaring.

“I think he needs to learn his own lessons in opposition.”

She added: "We're pro-business, pro-worker and getting on with fixing the mess that they left behind."

Sir Oliver said the House of Commons would have heard Ms Rayner “disregard five million hard-working small business owners”, adding: “These are the publicans, the shopkeepers, the family running a local cafe, none of those count as working people to her."