Overview
- The upgrade cites stronger‑than‑expected output and OBR projections showing roughly £1.3 trillion of government spending over this fiscal year and last, about £100 billion higher than 2023–24.
- EY expects growth to cool to 0.9% in 2026 before edging up to 1.3% in 2027 as the fiscal impulse fades and headwinds persist.
- Unemployment is projected to peak near 5% early next year before easing to about 4.7% by 2027, with employers reporting weaker hiring after the £25 billion rise in employer National Insurance contributions.
- A fiscal gap of around £30 billion is flagged ahead of the 26 November Budget, raising the prospect of tax measures to meet fiscal rules.
- Business investment is now seen rising 3.7% this year but slowing to 0.8% next year, while above‑target inflation, high borrowing costs and trade disruption are expected to restrain momentum; EY sees Bank of England rate cuts only by mid‑2026.