United Kingdom: Firmer footing into energy shock – Deutsche Bank

Deutsche Bank economists say in their World Outlook (WO) report, the United Kingdom (UK) entered the energy shock with stronger Q1‑2026 data, prompting only a marginal downgrade to growth. Stockpiling is expected to cushion activity as higher energy costs feed into inflation and real incomes. They forecast UK Gross Domestic Product (GDP) growth at 1% in 2026, rising modestly to 1.2% in 2027, with political uncertainty weighing on investment.

Solid start but inflation and politics weigh

"A stronger Q1-26 performance means the UK economy entered the energy shock on a firmer footing, hence only a marginal downgrading of the growth forecast since the last WO."

"Stockpiling will also support activity as the lagged energy effects feed into inflation (and thus real disposable incomes)."

"We remain cautious on the outlook from summer, as inflation bites into spending."

"Political uncertainty will also rear its head again, dampening investment and housing activity."

"Overall, we see GDP growth of 1% this year, rising to 1.2% next year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)