BCC Predicts UK Economy to Grow at 1% in 2026
The UK economy is expected to grow by only 1% in both 2026 and 2027, according to a forecast from the British Chambers of Commerce (BCC). This growth rate will increase to 1.3% in 2028. The BCC attributed this sluggish growth to higher energy costs and business expenses.
The private consumption sector is supporting GDP growth during the forecast period, while investment makes a diminishing contribution and net trade contributes negatively due to an export deficit.
The services sector accounts for most of the UK economy's output and is expected to grow by 1.5% in 2026. The construction industry will contract by 1.3%, but manufacturing is forecast to perform better than previously anticipated, growing at a rate of 1% in 2026.
The consumer price index (CPI) inflation rate is predicted to peak at 3.6% in Q4 2026 and then ease to 2.3% by the end of 2027. Higher household energy costs linked to the Middle East conflict are driving this forecast, with an additional risk from higher food prices due to droughts in parts of the UK.
David Bharier, deputy director economics and insights at the BCC, stated that 'businesses have absorbed another major geopolitical shock and shown real resilience.' However, he noted that growth remains subdued and relies heavily on consumption rather than investment.