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Morgan Stanley expects tepid growth for British economy in 2026
Morgan Stanley forecasts a slowdown in the UK's economic growth to 0.9% year-on-year in 2026. This lackluster performance will be accompanied by a rise in unemployment to an average quarterly level of 5.3% in the first half of the year. The bank's analysts anticipate that the Bank of England will initiate a prolonged cycle of interest rate cuts.
According to Morgan Stanley's projections, the growth of real disposable incomes will decelerate, while the savings rate will decline. The contribution of private capital expenditures is also expected to decrease, with government spending on growth reducing by 10 basis points. The unemployment rate is predicted to rise gradually, although some constraints will be provided by a decrease in immigration. Labor costs are expected to rise at a slower pace alongside inflation, which is projected to reach 2.3% year-on-year.
Analysts expect the Bank of England to lower rates in December and February, skip a reduction in March, and then resume cuts in April and June. As restrictive policies ease and global growth accelerates, the economy is anticipated to improve in the second half of 2026 and in 2027, although there are risks of contraction.
Published 15 December 2025
© InstaFintech Group
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© InstaFintech Group
