UK economic growth is expected to slow to 0.9% in 2026, following a 1.4% expansion in 2025, according to the Crédito y Caución report.
Despite the boost linked to investment in artificial intelligence, the recovery is held back by persistent weaknesses in the production of consumer goods and a deteriorating labor market.
The United Kingdom ranks third worldwide in the AI market, behind the USA and China, and has intensified measures to attract foreign investment in the sector — a factor that contributed to productivity gains in investment goods in 2025.
However, this dynamism is not reflected in a generalized way, as the production of consumer goods continues to contract and employment records a slight increase in unemployment, while wages remain stagnant, pressured by the increase in social security contributions.
The combination of higher wage, contribution and energy costs has hit corporate profitability hard, which in 2025 reached an 18-year low in the first half of the year. The slowdown in the labor market also tends to limit the prospects for private consumption, the report points out.
Global inflation temporarily rose again, averaging 3.8% in the third quarter of 2025, in part because companies passed on rising costs to prices. An additional spike resulted from the increase in the energy price cap in April, the document highlights.
Even so, a gradual fall in inflation is expected to around 2% at the end of 2027, which should allow the Bank of England to begin a cautious easing of monetary policy, with progressive cuts in interest rates. This less restrictive monetary environment and the stabilization of demand could favor a modest recovery in growth to 1.3% in 2027, highlights the report.
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