UK Outlook 2026—Catching Down

Goldman Sachs

James Moberly, Sven Jari Stehn

Research

11 Pages

Goldman Sachs explains why the UK may muddle through 2026 with steady growth even as unemployment drifts higher. Rate cuts and easing inflation do more of the heavy lifting than fiscal policy, which stays a drag. The interesting tension is that markets may be pricing gilts too pessimistically despite a cleaner disinflation path.

Date published: January 6, 2026

Key Takeaways

Growth stays trend like: Consumption improves mainly as saving eases, not because incomes surge.
Disinflation does the work: Cooling services inflation is key to giving the Bank room to keep cutting.
Policy risk remains: Fiscal credibility and politics shape how investors price UK rates and government debt.
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