UK Economy Forecast to Grow 1.3% in 2026 Despite Energy Bill Pressures

The UK economy is expected to grow by 1.3 per cent in 2026, despite mounting cost pressures, according to KPMG's latest economic outlook.

The consultancy notes that household spending has been supported by warmer weather and businesses investing in technology, underpinning growth through the first part of the year.

However, as the year progresses, rising energy bills and slow wage growth are expected to squeeze household budgets, with households' spending power likely to come under increasing pressure, according to Yael Selfin, chief economist at KPMG UK.

The Ofgem energy price cap is forecast to rise by roughly four per cent in October, while the government's reduction in VAT on household energy bills will only partially offset that increase.