Goldman Sachs – UK Outlook 2026—Catching Down, Jan 2026

The report analyzes the economic outlook for the United Kingdom in 2026.

It expects a mixed year with trend-like growth of about 1.4% (Q4/Q4), an increase in unemployment to 5.3% by March, and three Bank Rate cuts to 3%. Inflation is expected to materially decrease, with headline inflation declining to 2.1% in Q2 due to disinflation in services, energy, and rents. Real disposable income growth will remain weak, but consumption growth may pick up as savings rates decline with falling interest rates. Fiscal policy remains contractionary despite some near-term spending increases. Labour market conditions are weakening, with wage growth expected to slow to 3.1% by end-2026. The Bank of England is forecasted to cut rates in March, June, and September. The government is focused on structural reforms such as planning reform, improving EU trade relations, and boosting labor market participation, though challenges remain.