UK Outlook – July 2026
New Prime Minister, Similar Outlook
We have kept our outlook unchanged for the most part, with a few slight tweaks. The economy continues to face a number of headwinds, including ongoing geopolitical tensions and high/volatile global energy prices. We expect below trend GDP growth of 0.9% this year and 1.1% next year (both upgraded by 0.1%). Inflation is still set to rise over coming months, though by slightly less than we were projecting in May. Unemployment is likely to tick up further, though it may peak at a slightly lower rate than previously expected. With monetary policy remaining slightly restrictive and spare capacity rising we expect the BoE to leave rates on hold for the balance of this year. The change of government is likely to usher in some adjustments to economic and fiscal policy. Downside risks continue to dominate, most obviously the situation in the Middle East, which remains volatile.
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