Encouraging economic data in recent weeks has offered the UK government some relief, but economists warn that the broader picture remains fragile and highly exposed to domestic and global shocks.

Official figures show that the British economy has returned to modest growth after periods of stagnation, with inflation continuing to ease from the multi-decade highs seen in previous years.

Wage growth has improved in nominal terms and business confidence surveys have ticked upwards, contributing to a more optimistic tone in financial markets.

However, analysts stress that these improvements rest on a narrow base.

Output remains only marginally above pre-pandemic trends, productivity growth is subdued, and real household incomes, when adjusted for the cumulative impact of inflation, have yet to recover fully.

Consumer spending continues to be constrained by high borrowing costs, as interest rates remain elevated compared with the ultra-low levels of the 2010s.

Public finances present another challenge.

Government debt remains historically high as a share of national income, limiting fiscal flexibility.

At the same time, demands on public services and infrastructure investment have intensified, placing pressure on future budgets.

Business investment, while stabilising, has been uneven, with smaller firms reporting difficulty accessing finance amid tighter credit conditions.

External risks further complicate the outlook.

Slower growth among key trading partners, persistent geopolitical tensions and volatility in energy markets all pose potential headwinds.

Trade frictions and regulatory adjustments following the UK’s exit from the European Union continue to shape supply chains and export dynamics, even as new agreements are pursued.

Economists argue that while the immediate threat of recession may have receded, the underlying vulnerabilities in productivity, investment and household resilience leave the economy in a precarious position.

Sustained improvement, they say, will depend not only on cyclical recovery but on structural reforms capable of boosting long-term competitiveness and living standards.