UK Economy Shows Resilience Despite Global Disruption

The UK economy has shown resilience in the face of global disruption and is now forecast to grow at a slightly better-than-expected pace in 2026, according to EY's new Economic Outlook.

GDP growth is expected to rise from 0.8% in May to 0.9% in 2026, with a projected increase to 1.2% in 2027. However, the recent escalation of the conflict in the Middle East and disruption in the Strait of Hormuz are set to weigh on growth towards the end of the year.

If the Strait remains closed until early or mid-2027, UK GDP growth could fall to 0.5% this year and contract by 0.2% in 2027. UK inflation is forecast to rise to 3.5% by the end of the year if the strait reopens in Q3, but could reach 6.4% if it remains closed.

The Bank of England is expected to hold the Bank Rate at 3.75% for the rest of 2026 and implement two interest rate cuts of 25 basis points each in April and July 2027.