UK Economy Shows Surprising Resilience Amid Energy Price Shock

The UK economy has shown surprising resilience in the face of an energy price shock caused by the Iran war, but a slowdown is still on its way. This according to new projections from the National Institute of Economic and Social Research (NIESR), which forecast gross domestic product growth at an annual rate of 1.1% in 2026.

The NIESR's deputy director for macroeconomics, Stephen Millard, notes that 'the UK economy proved to be surprisingly resilient in the first half of this year, but a slowdown is still to come.' He also warns that even if peace is restored quickly in the Middle East, inflation will still rise and the new Chancellor will have to make difficult decisions.

The projections from NIESR suggest that inflation will average 3.1% in 2026, peaking at 3.8% in February 2027 before returning to target in 2029. The jobless rate is expected to peak at 5.3% in the first quarter of 2027.