European Economics Analyst UK—Will Growth Resilience Continue

Economics Research 9 October 2026 | 8:10PM BST

UK—Will Growth Resilience Continue?

n UK GDP growth has accelerated this year, defying expectations for a slowdown James Moberly | on the back of higher energy prices and tightening financial conditions. This Goldman Sachs International Analyst assesses why growth has proved resilient and whether recent strength is likely to continue. n Several factors have supported growth. First, consumer spending has remained surprisingly resilient. That may reflect low seasonal energy usage over the summer limiting the impact of higher gas prices on household finances, as well as temporary factors including warm weather and promotions. Second, business investment has continued to rise, reflecting strong trends in utilities and ICT capex. Third, information and communications output has grown on the back of rising business spending on technology services. Fourth, global demand has held up better than expected. n Looking ahead, we continue to expect growth to slow in the near term. Consumer spending is likely to weaken over the winter as the impact of rising energy bills and higher mortgage rates continues to build, while some of the temporary boosts seen in H1 fade. We expect growth to slow to a 0.2%qoq pace in Q4 and 0.3% in Q1. n That said, we expect the outlook to improve later in 2027. Our strategists expect gas prices to decline significantly and we forecast less BoE tightening than the market prices, indicating that key headwinds should recede. We also expect solid global growth to continue to support demand. In addition, some of the more structural trends that have modestly boosted growth this year – including rising utilities capex and increasing business technology spending – look likely to persist. n Overall, our forecasts imply Q4/Q4 growth of 1.9% in 2026, slowing to 1.5% in 2027. While the recent strength in activity strengthens the case for a November BoE hike, a slowdown over the winter would support our forecast for the BoE to raise Bank Rate less than the market expects.

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Goldman Sachs European Economics Analyst

UK—Will Growth Resilience Continue?

UK growth has proved surprisingly resilient this year. GDP rose by 0.6% in Q1 and 0.5% in Q2 – somewhat above our estimate of trend growth – defying expectations for a slowdown on the back of higher energy prices and tightening financial conditions. Our tracking model currently points to a further 0.5% expansion in Q3.

Exhibit 1: Surprisingly Resilient Growth

Source: Goldman Sachs Global Investment Research, Haver Analytics, Bloomberg

It is possible that firm growth at the start of the year partly resulted from residual seasonality in the post-pandemic activity figures. But shifting seasonal patterns cannot explain the strength in Q2 and Q3. The soft data also suggest that the recent resilience in activity is not purely a statistical artifact. To be sure, the surveys indicate that underlying growth is slower than the pace implied by the headline GDP figures. But on average they still point to a moderate expansion, with no obvious signs of a deterioration since the start of the Middle East conflict.