- Following a strong start to the year, UK GDP growth slowed in the second quarter, due to a slowing labour market and geopolitical uncertainties surrounding the Middle East conflict. UK growth is expected to continue softening in the second half of the year.
- UK headline inflation softened in recent months, to 2.6% in June, reflecting a cut in the government’s cap on energy bills announced just before the conflict. Inflation is expected to rise over the second half of this year as higher oil and gas prices raise the energy price cap for the quarter ahead and feed through to other consumer goods and services.
- The Bank of England held interest rates in July as it continues to assess the inflationary impact from the disruption to global energy production against a weakening in business activity. Markets expect the bank to raise interest rates by the end of this year.
- The latest Deloitte CFO survey for the second quarter of 2026 shows a slight easing of uncertainty, however geopolitics remains the top external risk for businesses and finance leaders continue to assume a defensive strategy stance. Other timely economic indicators suggest that consumers also remain cautious.
- While sentiment on capex remains subdued, the Deloitte CFO survey shows finance leaders are upbeat on investment in digital technology and are more optimistic about the potential for AI to improve their own businesses’ performance.
- The latest Spring Forecast saw headroom rise further to nearly £24bn due to greater than expected tax receipts, although the ongoing Middle East conflict has increased uncertainty around these projections.
- Policy announcements made in the 2025 Autumn Budget mean that both taxation and public spending as a share of GDP are expected to reach some of the highest levels not seen outside recessions or wartime. Government debt is also expected to remain at a high level throughout the parliament.
- Timing: the Autumn Budget will take place on 28 October 2026.
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