UK economic growth as price pressures build

CREATED BY ROGER EDDOWES Published: 26/05/2026 @ 09:00AM #UKeconomy #economicgrowth #higherprices #households #firms #inflationcosts

UK economic growth has remained surprisingly resilient, but higher prices are making households and firms more cautious. The big question is whether inflation costs translate into lasting wage pressure, which would force the BoE to stay tougher for longer ...

UK economic growth is facing price pressures as it continues to slowly expand

UK economic growth has shown steadier momentum than many expected, even as the latest wave of price pressures begins to erode confidence and spending plans. The economy had already built a bit of momentum heading into the latest shock, which has helped prevent activity from stalling outright.

But the mood across both households and firms has clearly
darkened as rising costs become harder to ignore!

I think that what has made the picture more interesting is that growth has not disappeared; it has simply become more uneven. Business surveys still point to expansion in parts of manufacturing and services, suggesting business growth has not been completely knocked off course.

At the same time, some of the recent strength may have been flattered by stockpiling and precautionary buying rather than by clean, underlying demand. That matters because it means economic growth may look firmer on the surface than it really is.

Consumers, meanwhile, are acting far more defensively. Confidence has definitely slipped, expectations for the economy have weakened, and households appear to be preparing for a longer period of strain.

That is a natural response when inflation costs are rising faster than wages and when people fear the next utility bill, food shop or transport fare will be even higher. In those sorts of market conditions, I'm not surprised that savings intentions are edging up while enthusiasm for major purchases is fading.

The housing market is also feeling the chill!

Buyer enquiries have softened, which usually tells a clear story: people are waiting for greater stability before making big decisions. That hesitation does not yet amount to a collapse, but it suggests that economic growth is increasingly dependent on how long consumers can tolerate higher prices without cutting back more sharply.

For policymakers, I believe the key issue is not simply whether inflation is higher, but whether it starts to feed into expectations and pay-setting behaviour.

The Bank of England will be closely watching for any sign that this shock becomes embedded. If inflation costs continue to push up wages and service prices, our central bank may need to respond more firmly. If not, it may be able to wait, but only with a careful eye on how quickly conditions evolve.

I feel there is a broader strategic point here!

Markets have already tightened financial conditions, which does some of the work for the BoE, but it does not eliminate the risk that the next round of inflation surprises will force a harder policy stance.

That's why economic growth matters so much right now: it gives the economy room to absorb shocks, but it also gives policymakers less excuse to ignore the inflation problem if it persists.

For now, the data shows a degree of endurance, but the direction of travel is far less comfortable.

Until next time ...

ROGER EDDOWES
Join our mailing list! Click here and be one of the first to know when we publish a new blog post!

Share the blog love ...

Buffer Facebook Twitter Linkedin Pinterest WhatsApp #UKeconomy #economicgrowth #higherprices #households #firms #inflationcosts

About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

More blog posts for you to enjoy ...
		Key employment law changes employers need to know this August Employment law continues to evolve, and recent government consultations and tribunal decisions provide several important reminders for UK employers. From workplace monitoring technology and disciplinary procedures to unfair d...
		Self employed taxpayers warned about class 2 NIC record errors HMRC has spotted errors in Class 2 NIC records affecting some self-employed people who did not register properly. The good news is that fixes are being rolled out, and some taxpayers may be able to top up gaps later. It is wo...
		Andy Burnham's tax plans: what could they mean for businesses and taxpayers? With Andy Burnham declaring himself 'ready' to lead the country, attention has naturally turned to what a Burnham government might mean for the UK's tax system ......
		How the recent heatwaves have cost businesses billions The record-breaking June heatwave was more than just a talking point. According to new research from the London School of Economics (LSE), the exceptionally high temperatures led to an estimated 24 million lost working hours,...
		HMRC's mandatory direct debit for VAT and PAYE plans explained Mandatory direct debit for VAT and PAYE could soon become the norm for most businesses. The plan aims to improve collections and reduce errors, but it may create headaches for some businesses, especially those using other pay...
		Are you thinking of employing young workers this summer? The summer holidays are a popular time for young people to gain their first work experience, and many businesses welcome the extra help during their busiest months ......
		Why Artificial Intelligence is changing recruitment Artificial intelligence is no longer something businesses are simply experimenting with, and it is rapidly becoming part of everyday life, especially in recruitment. The latest AI hiring trends suggest that this shift will on...
		Growing our team to support yours At Essendon, we believe that good accounting is about more than numbers. It's about giving business owners confidence that everything is organised, properly handled, and under control ......

Other bloggers you may like ...
		Why simple safety systems usually work best Posted by Steffi Lewis on https://www.yourping.uk When it comes to personal safety, it's easy to assume more features mean better protection. Mobile apps, wearable devices, panic buttons, and complex ...
		Preparing to retire: practical advice for small business owners Posted by Jacky Sherman on https://www.jackysherman.com Thinking about retiring from your business can feel a bit surreal. For many small business owners in the UK, the line between 'work' and 'life' has be ...
		Workation in Milton Keynes: Work Smarter, Switch Off Faster Posted by Emily Freeman on https://blog.shortstay-mk.co.uk Thinking about a Workation? Milton Keynes makes it simple to stay productive without feeling stuck. You get strong connections for work and plenty of ...
		Green careers in the UK: Opportunities beyond renewable energy Posted by Dave Cordle on https://blog.davecordle.co.uk When people think about green careers, they often picture wind turbines, solar farms or electric vehicles. While these industries are creating thousan ...