United Kingdom economy at a glance

Key figures

Questions and answers

Outlook

The BoE projects CPI rising to about 3.75% in Q4 2026 and just above 4% in early 2027 on higher oil and gas prices; September CPI already jumped to 3.5%, and markets almost fully price a hike to 4% on 5 November. The main downside risks are tighter financial conditions, multi-decade-high gilt yields, a sharp fall in consumer confidence (GfK -24 in October, the biggest drop since the pandemic) and fiscal tightening in the 28 Oct Budget, where Deutsche Bank expects about £5bn of tax rises. The upside is that Q2–Q3 output beat forecasts and unemployment eased to 4.7% in June–August, although payrolled employment and vacancies are falling.

Why United Kingdom matters for the world economy

The UK matters to the world mostly through finance. London is the biggest hub for FX and cross-border lending, and the gilt market has become a pressure point: sell-offs in long gilts spill into European and US duration, and back again. As a large importer of EU goods and energy, its demand matters most to Ireland, the Netherlands, Germany and Belgium. Sterling and UK fiscal credibility also drive pension and insurance flows that cross into global rates markets. Its services exports and North Sea energy add smaller channels.

Politics

Andy Burnham took over from Keir Starmer as Labour leader and Prime Minister in July 2026 and appointed John Healey as Chancellor. He has pledged to stick to the inherited fiscal rules while using whatever flexibility they allow. Healey's first Budget on 28 October doubled the bank surcharge to 6% for 15 months, raised tax rates on savings and property income and extended fuel-duty and energy-bill support, leaving £15bn of headroom against the main fiscal rule, down from £24bn in March. Gilt markets took it calmly after long yields hit multi-decade highs in early October, but borrowing is running ahead of OBR forecasts and the thinner buffer leaves little room for new shocks.

System: Unitary parliamentary constitutional monarchy.

Economy and taxes

GDP

US$4,003 billion

Population

69.5 million

Government debt

100.1% of GDP

Budget balance

−5.2% of GDP

Current account

−3.0% of GDP

Exports

30.6% of GDP

Main exports

Financial and business services, machinery and vehicles, pharmaceuticals, precious metals (gold), crude oil and refined fuels, aerospace

Top export markets

United States (15.9%), Germany (7.7%), China (6.6%), Netherlands (5.9%), Switzerland (5.5%)

IMF growth forecast

1.3% in 2026, 1.2% in 2027

IMF inflation forecast

3.3% in 2026, 2.8% in 2027

Currency

GBP

Freelancer tax

A self-employed person earning the average wage (GBP 48,930 a year) pays about 19.3% of it in income tax and social contributions (2026 rules)

Top income tax rate

45.0%

Gold reserves

310.3 tonnes (September 2026)

Energy self-sufficiency

56% (2024)

Recent news

• 5 November 2026 Bank of England raises Bank Rate to 4% as energy prices push inflation up Bank of England

  The MPC voted 8–1 to lift Bank Rate by 0.25 points to 4%; one member wanted a half-point rise to 4.25%. CPI inflation, 3.5% in September, is now expected to reach around 5% by the middle of 2027 as energy prices keep rising during the Middle East conflict. The Committee saw limited evidence of knock-on effects on other prices and wages so far, but enough pressure in the pipeline, and stronger activity data, to justify a hike. It said policy is not on a pre-set path.

• 4 November 2026 FTSE 100 jumps 1.8% as banks rally ahead of an expected rate rise Investing.com

  London's main index rose 1.8% to a two-week high, its best day since July, led by gains of 3.6-5.4% for Barclays, HSBC, NatWest, Lloyds and Standard Chartered. Money markets priced an 80% chance that the Bank of England lifts Bank Rate to 4% on Thursday.

• 30 October 2026 Gilt yields ease after the Budget and the pound heads for its first monthly gain since August The Beaver

  Investors saw the Budget as uneventful: the 10-year gilt yield slipped to about 5.31% on Budget day and hit a five-week low the next day, helped by smaller planned sales of long-dated debt. The pound rose to $1.343 on 30 October, on course for about a 1% gain in October.

• 28 October 2026 Healey's first Budget doubles the bank surcharge and extends the fuel duty cut HM Treasury

  Chancellor John Healey raised the bank surcharge from 3% to 6% for 15 months and lifted tax rates on savings and property income, while extending the 5p fuel duty cut and adding help with energy bills. Headroom against his main fiscal rule shrank to £15bn from £24bn in March, mainly on higher debt interest.

• 27 October 2026 Healey's first Budget on 28 October expected to raise about £5bn in taxes City AM

  City analysts expect the Chancellor to rebuild fiscal headroom to at least £15bn, down from £23.6bn in spring, with Deutsche Bank expecting roughly £5bn of tax rises on online retailers, gambling and bank profits plus temporary cost-of-living help.

• 23 October 2026 UK consumer confidence suffers its biggest fall since the pandemic NielsenIQ (GfK)

  The GfK index plunged 11 points to -24 in October, far below the -15 expected, as views of the economy and plans for big purchases soured. Rising inflation expectations add to the case for a Bank of England hike.

Headlines and summaries are compiled daily from the linked reports with AI assistance.

Sources

• ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/august2026
• ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2026
• ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/february2026
• ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/january2026
• ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/november2025
• tradingeconomics.com/united-kingdom/core-inflation-rate
• bankofengland.co.uk/boeapps/database/Bank-Rate.asp
• tradingeconomics.com/united-kingdom/interest-rate
• ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/timeseries/mgsx/lms
• tradingeconomics.com/united-kingdom/unemployment-rate/news/583718
• fred.stlouisfed.org/data/IRLTLT01GBM156N.txt
• investing.com/rates-bonds/uk-10-year-bond-yield-historical-data
• tradingeconomics.com/united-kingdom/government-bond-yield
• ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyr/qna
• ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyq/qna
• ons.gov.uk/economy/grossdomesticproductgdp/bulletins/quarterlynationalaccounts/apriltojune2026
• forexfundamentals.com/economic-calendar/uk-pmi
• trade.gov.tr/news/uk-manufacturing-pmi-increased-to-50-2-in-november-2025
• tradingeconomics.com/united-kingdom/manufacturing-pmi
• ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j5ek/drsi