LONDON, UNITED KINGDOM / RankWire.AI / – Britain’s economy maintained its expansion into the early months of 2026, despite persistent upward pressure from inflation, investment, and hiring figures. EY projects a UK gross domestic product growth of 0.9% for 2026 and 1.2% in 2027. The consulting firm increased its 2026 forecast by 0.1 percentage points from its May estimate. This central forecast assumes the Strait of Hormuz reopens by September, though shipping volumes are expected to stay below normal levels based on this scenario.
Official statistics revealed that the UK economy grew by 0.6% during the first quarter. This growth followed a 0.1% increase in the last quarter of 2025. Year-over-year, output is 0.9% higher. The services sector led the quarterly rise, expanding by 0.8%. Household spending also increased by 0.6% during the same period. These figures do not qualify as a technical recession, which would require two consecutive quarterly contractions.
Energy markets continue to be a significant factor influencing UK prices and production costs. The Strait of Hormuz accounts for a large share of global oil and liquefied natural gas shipments. While Britain imports limited energy directly from Gulf suppliers, international prices significantly impact domestic fuel costs. Producer input prices rose 7.3% over the year ending in June. Crude oil input costs surged by 42.3%, and factory-gate prices increased by 3.5%.
Inflation Remains a Key Focus for Monetary Policy
Consumer price inflation slowed to 2.6% in June from 2.8% in May. Despite this decrease, the rate still exceeds the Bank of England’s 2% target. Motor fuel prices rose by 21.3% compared to a year earlier. On July 29, the Bank of England kept its benchmark rate steady at 3.75%. The decision was supported by a 6-3 vote for no change, with three members advocating an increase to 4%. The voting results reflect ongoing concerns about inflationary pressures.
Business surveys offered mixed signals at the start of the third quarter. The manufacturing purchasing managers’ index fell to 51.9 in July from 52.5 in June. Although this was a four-month low, it still indicated expansion, as readings above 50 suggest growth. Additionally, a preliminary composite index increased to 52.1 from 49.3, covering both manufacturing and services. This broader measure showed renewed growth in the private sector during July.
Weak Investment and Labour Market Activity Persist
Business investment increased by 0.9% in the first quarter, after experiencing a decline of 3% in the previous three months. However, overall investment was still 1.3% below its level from a year earlier. EY anticipates a 0.7% decline in business investment throughout 2026. Its earlier forecast had predicted no change annually. The firm expects investment to grow by 1.8% in 2027 and 2.6% in 2028, but both estimates remain below its initial projections.
During the three months leading up to June, the UK recorded 712,000 job vacancies. This figure decreased by 7,000 from the previous quarter and fell 2.5% from a year earlier. Ten out of 18 industries measured saw declines in vacancies. Nonetheless, the quarterly change stays within the survey’s confidence interval. Meanwhile, regular pay increased by 3.4% from March through May. These latest figures highlight ongoing economic growth, though inflation remains above target. At the same time, hiring is weaker, and business investment continues to decline compared to previous years.
}**Note:** The JSON structure follows the specific rules, including keeping all exact facts and hyperlink details, while restructuring sentences and wording as instructed. The title is a longer, descriptive sentence, and the content is rewritten with sentence splits and rephrased clauses.}}