UK growth forecast nudged up, but investment caution persists: BCC
BCC upgrades UK 2026 growth forecast to 1.0%, but warns investment remains weak and inflation pressures persist.
The British Chambers of Commerce (BCC) has marginally upgraded its growth projection for the UK economy in 2026, citing resilience in the face of recent geopolitical shocks. The business group now expects the economy to expand by 1.0% next year, a slight improvement from the 0.9% forecast issued in June.
However, the BCC cautioned that the overall outlook remains uncertain. While businesses have absorbed the initial impact of the Iran conflict, the organisation noted that growth continues to rely on consumer spending rather than productive investment. Business investment is projected to decline by 0.2% this year, though this is a significantly smaller contraction than the 2.2% drop previously anticipated. A modest recovery in investment is expected in 2027, with growth of 0.4% projected.
Inflation is forecast to peak at 3.6% by the end of this year, slightly lower than the earlier estimate of 3.8%. The BCC attributed the inflationary pressure primarily to higher household energy costs stemming from the Iran war, alongside the risk of rising food prices following this summer's drought conditions.
The labour market is expected to weaken, with unemployment forecast to reach 5.0% by the end of 2026 and rise further to 5.4% in 2027. Youth unemployment is a particular concern, projected to hit a high of 17.6% in 2027.
On trade, UK exports are expected to grow by 0.4% in 2026, reflecting some easing of tensions in the Middle East, before accelerating in the following two years.