Rising Energy Costs Threaten UK Growth Despite 1.3% Expansion

The UK economy is forecast to grow in 2026, but rising energy bills and higher borrowing costs will weigh on activity in the second half of the year. The economy is set to grow 1.3 per cent this year, according to KPMG's latest economic outlook, after household spending was "supported by warmer weather" while businesses continued to invest in technology. The consulting firm also estimates the economy will grow 1.4 per cent in 2027. But spending is set to slow in the second half of the year as households deal with rising energy bills and slow wage growth. "Households' spending power is likely to come under increasing pressure," said Yael Selfin, chief economist at KPMG UK. "The longer-term challenge is how to sustain stronger growth as the contribution from a growing labour force diminishes."