BCC ECONOMIC FORECAST: Growth to remain subdued

The British Chambers of Commerce (BCC) has revised its economic forecast downward, predicting weak growth for the UK through 2027 due to ongoing geopolitical tensions in the Middle East. GDP growth is now expected to slow to 0.9% in 2026—down from a previous 1.0% estimate—before reaching 1.0% in 2027 and 1.3% in 2028. The Middle East conflict is identified as a key factor, with business investment projected to fall by 2.2% this year and remain negative at -0.1% in 2027. Inflation is forecast to rise sharply, peaking at 3.8% by the end of 2026 before easing to 2.3% in late 2027, driven by higher energy and shipping costs linked to regional instability. The Bank of England is expected to maintain its current monetary policy, though risks remain if inflation pressures worsen. Exports are projected to decline by 0.2% in 2026, reversing a previous growth forecast, before rebounding to 1.3% growth in 2027. The conflict’s impact on global supply chains, including potential disruptions in the Strait of Hormuz, poses significant uncertainty. Meanwhile, unemployment is set to increase to 5.2% in 2026 and 5.5% in 2027, with youth unemployment reaching 17.8% next year due to labor cost pressures and automation. The services sector remains the economy’s bright spot, with 1.3% growth expected in 2026, while construction is forecast to shrink by 1.0% and manufacturing to grow modestly at 0.8%. Business investment is anticipated to contract further in 2026 before recovering in 2028, reflecting firms’ caution amid elevated costs and geopolitical risks.