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UK Growth Forecast at 0.9% Amid Tax Increases

2/4/2026

23 3 Full Breakdown

Center

EY Forecasts UK Growth

The EY Item Club forecasts UK growth at 0.9% in 2026, citing Labour's tax increases and spending cuts.
No new tax rises are expected this year, but geopolitical instability and trade disruptions may hinder growth.
Business investment is to contract 0.2% this year, with a potential rebound next year after rate cuts.
Arm Holdings’ CEO criticized limited UK venture capital access and urged greater risk appetite.

Left

NIESR Warns Economic Decline

The National Institute of Economic and Social Research (NIESR) warns that zero net migration could shrink the UK economy by 3.6% by 2040, creating a £37 billion funding shortfall.
The scenario would require tax increases or higher borrowing, worsening public finances.
NIESR revised the 2025 GDP growth forecast to 1.4%, down from 1.5%.
NIESR expects unemployment to peak at 5.5% in late 2026.
NIESR recommends reducing debt to prepare for shocks.

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EY Forecasts UK Growth

The EY Item Club forecasts UK growth at 0.9% in 2026, citing Labour's tax increases and spending cuts.
No new tax rises are expected this year, but geopolitical instability and trade disruptions may hinder growth.
Business investment is to contract 0.2% this year, with a potential rebound next year after rate cuts.
Arm Holdings’ CEO criticized limited UK venture capital access and urged greater risk appetite.

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