Overview
- The EY Item Club now forecasts GDP growth of 0.9% for 2026, a slight upgrade from 0.8% previously but down from an estimated 1.4% in 2025.
- Business investment is projected to shrink by 0.2% this year after a prior forecast for 0.8% growth, reflecting softer confidence and higher costs.
- Unemployment is expected to peak at about 5.2% in the first half of 2026, the highest since early 2021, before easing toward 4.7% by 2028.
- Fiscal tightening stems from the £26bn of Budget tax rises and earlier increases in employer National Insurance contributions, which EY says will restrain spending.
- EY expects the Bank of England to hold rates this week and deliver one further cut in April as inflation approaches 2%, with wage growth near 3% limiting gains in living standards.