Forecast predicts GDP to grow by 0.9% this year

A forecast by EY ITEM Club expects UK GDP to grow by 0.9% in 2026 a marginal upgrade on the 0.8% predicted in November’s Autumn Forecast.

The data predicts the economy will accelerate growth to 1.3% in 2027 and will settle at 1.4% from 2028 onwards.

Global uncertainty and tariff disruption are expected to be the leading drivers of this subdued growth and are predicted to weigh on private sector confidence. Tightening fiscal policy and an anticipated end to the cycle of interest rate cuts are also expected to contribute to the modest economic outlook for 2026, although these are forecast to exert less influence than volatility in the global market.

The EY ITEM Club expects UK GDP to have grown by 1.4% across 2025 as a whole – a marginal decrease from the 1.5% forecast in November’s Autumn Forecast after a weaker-than-expected performance through the summer.

Anna Anthony, EY UK & Ireland Regional Managing Partner, said “While momentum slowed in the second half of 2025, it still marked the UK’s fastest year of growth since 2022, despite a volatile global macroeconomic environment. The start of 2026 has seen this uncertainty intensify once again, highlighting the turbulent market conditions that businesses continue to navigate and factor into their spending plans.

“Private sector investment is expected to contract this year, keeping UK growth subdued. However, a further reduction in interest rates should bring down the cost of finance and support a rebound in business spending next year. In the meantime, businesses will be looking to policymakers to further embed stability into the UK economy to support longer term planning and investment decisions. Maintaining a steady, transparent and growth-oriented policy environment will build on the UK’s strengths as a stable, attractive investment destination in an otherwise unpredictable global landscape.”