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
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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.

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