UK economy proves resilient as growth beats Bank of England forecasts

The Bank of England's November 2026 Monetary Policy Report finds that the UK economy has been growing faster than the bank expected in July. According to the bank, GDP growth was 0.5% in the second quarter of 2026, and may reach 0.7% in the third quarter. The July forecast had assumed 0.3% and 0.1% respectively.

What is driving growth

The main source of the recovery is services, particularly business-to-business services such as information and communications. Business investment rose by 1.8% in the second quarter, after growth of 3% in the first quarter. The bank described this as the fastest two-quarter growth in business investment since 2022. Part of this activity is linked to investment related to artificial intelligence.

The labour market is also showing resilience, with employment growing and unemployment falling. Despite higher energy prices linked to the conflict in the Middle East, many observers describe the UK economy as resilient.

Interest rates and risks

On 5 November 2026, the Bank of England raised Bank Rate by 0.25 percentage points, to 4.0%. The bank pointed to inflationary pressure stemming from higher energy prices.

The bank expects growth to slow in the fourth quarter of 2026 and in 2027. It lists higher inflation, tighter financial conditions and ongoing fiscal consolidation as headwinds that offset the recovery. Its projections show that real household income is set to fall in the second half of 2026.

What this means for you

Strong economic data does not mean the cost of living will stop rising. The projected fall in real household income applies to people living in the UK in general, including those who work here. Tighter financial conditions also mean harder access to loans and credit and higher costs of servicing them, which is worth considering when planning a budget or a house purchase.