UK Economy Seen Growing Around One Point Four Per Cent in 2026 Despite Sluggish Jobs Market
Forecasts suggest moderate expansion even as employment weakens and domestic demand remains subdued
The United Kingdom’s economy is projected to expand by about one point four per cent in 2026, according to recent forecasts from independent forecasters and official estimates, even as employment data show signs of weakening and business confidence softens.
The latest outlook from the Office for Budget Responsibility anticipates modest output growth, reflecting a continuation of moderate expansion rather than robust acceleration.
Underlying the growth projection is a complex mixture of supportive public spending and subdued private demand.
Consumer spending has been constrained by cost-of-living pressures and weaker household confidence, while business surveys point to restrained hiring and declining investment intentions.
Recruiters and labour market analysts report that firms are hiring cautiously, and employment growth expectations have moderated following a long period of labour market expansion, even as average starting pay for certain roles has risen.
Although output growth is forecast to remain positive, labour market trends indicate notable slack.
Surveys by the Recruitment and Employment Confederation and accountancy firms revealed a continued decline in hiring activity toward the end of 2025, even as employers balanced restrained recruitment with slight increases in pay for specialised roles.
Broader business confidence has been dented by cost pressures and uncertainty about future demand, while core sectors such as manufacturing and services report mixed signals on activity and investment.
Public and private forecasters emphasise that slower wage growth and cautious consumer spending will temper the pace of economic momentum.
Nonetheless, the projection of around one point four per cent GDP growth, while below historical averages, aligns with a view of the UK economy navigating persistent domestic and global headwinds without slipping into contraction.
Policymakers are likely to focus on bolstering confidence and addressing structural challenges if growth weakens further, but for now the expectation of moderate expansion persists into the year ahead.
The latest outlook from the Office for Budget Responsibility anticipates modest output growth, reflecting a continuation of moderate expansion rather than robust acceleration.
Underlying the growth projection is a complex mixture of supportive public spending and subdued private demand.
Consumer spending has been constrained by cost-of-living pressures and weaker household confidence, while business surveys point to restrained hiring and declining investment intentions.
Recruiters and labour market analysts report that firms are hiring cautiously, and employment growth expectations have moderated following a long period of labour market expansion, even as average starting pay for certain roles has risen.
Although output growth is forecast to remain positive, labour market trends indicate notable slack.
Surveys by the Recruitment and Employment Confederation and accountancy firms revealed a continued decline in hiring activity toward the end of 2025, even as employers balanced restrained recruitment with slight increases in pay for specialised roles.
Broader business confidence has been dented by cost pressures and uncertainty about future demand, while core sectors such as manufacturing and services report mixed signals on activity and investment.
Public and private forecasters emphasise that slower wage growth and cautious consumer spending will temper the pace of economic momentum.
Nonetheless, the projection of around one point four per cent GDP growth, while below historical averages, aligns with a view of the UK economy navigating persistent domestic and global headwinds without slipping into contraction.
Policymakers are likely to focus on bolstering confidence and addressing structural challenges if growth weakens further, but for now the expectation of moderate expansion persists into the year ahead.
