What Should UK Investors Expect in 2026?

As we step into 2026, the economic landscape in the UK and across the globe continues to shift. After several years marked by high inflation, geopolitical uncertainty, and changing monetary policy, UK investors face a new set of opportunities and challenges. Understanding these macro trends is crucial for making sound financial decisions in the year ahead. Here’s what you need to know. 

The UK has finally seen a meaningful drop in inflation after a prolonged period of rising prices. In November 2025, inflation fell to 3.2%, down from 3.6% the previous month. This decline was helped by falling food and drink prices, which dropped month-on-month - a welcome relief for households. Most economists expect inflation to keep trending downward through 2026. Several factors are supporting this outlook, such as Lower energy prices compared to the peaks of 2022–2023, global supply chains stabilising after years of disruption, and softer consumer demand as households adjust to higher borrowing costs. Independent forecasts, including those compiled by HM Treasury, also predict further moderation in inflation. However, there are still risks. Wage growth, while slowing, remains above pre-pandemic levels, and global commodity markets are sensitive to geopolitical events. Any resurgence in oil or gas prices, or renewed supply chain issues, could slow the progress on inflation, however, there are suggestions there could be an oversupply of oil in 2026, which could provide further support for a reduction in inflation globally.

The Bank of England has started to ease monetary policy, cutting the base rate to 3.75% at the end of 2025, the lowest rate since early 2023. The decision was close, reflecting uncertainty within the Monetary Policy Committee about how quickly to loosen policy. Further rate cuts are likely, but the pace will depend on how inflation evolves. The Bank has already made policy “significantly less restrictive” after 150 basis points of cuts since August 2024. Most economists expect: 

• Gradual rate reductions through 2026.
• Rates stabilising around 3.0%–3.5% by year-end.
• Cautious moves from policymakers to avoid reigniting inflation.

For households and investors, this means mortgage rates should continue to ease, though slowly, while savings rates may drift lower. Borrowers will welcome the relief, but savers may need to rethink their cash strategies as the interest-rate environment normalises. 

The UK economy ended 2025 on a soft note, with GDP contracting by 0.1% in both September and October and showing no growth since June. This stagnation reflects subdued consumer spending, weak productivity, and a cooling labour market. Looking ahead, forecasts for 2026 suggest modest but positive growth. Slight GDP growth is expected, though still below long-term averages. Momentum is likely to be slower due to a weakening labour market, keeping consumer spending subdued. 2026 is set to be a year of adaptation, with businesses and households adjusting to recent structural changes rather than experiencing strong headline growth. 

Key drivers of UK growth in 2026 include:

• Increased investment in green energy and data-centre infrastructure.
• Strengthening public-sector investment as infrastructure projects ramp up.
• A gradual recovery in real household incomes as inflation falls. 

However, the UK still faces challenges such as low productivity growth, regional inequality, and tight fiscal conditions.

The global economy is set for uneven growth in 2026. While the UK and parts of Europe face subdued momentum, other regions are better positioned for stronger performance. 

United States: The US economy remains resilient, supported by strong consumer spending and labour markets. However, higher interest rates and fiscal tightening may slow growth, though the US is still expected to outpace Europe. 

Eurozone: The region continues to struggle with weak industrial output and sluggish consumer demand. Growth will likely remain modest, with inflation still above the European Central Bank’s target in some countries. 

China: Growth remains uncertain due to structural issues like the property-sector downturn and demographic pressures. Policymakers are expected to introduce targeted stimulus, but growth will likely stay below the rapid rates of the past decade. 

Emerging Markets: These economies present a mixed picture. Commodity exporters may benefit from stabilising global demand, while others face challenges from high debt and currency volatility. Countries with strong domestic demand and diversified exports are likely to outperform 

For UK investors, the macro backdrop suggests a period of cautious optimism. Falling inflation and lower interest rates should support both equities and bonds. Infrastructure, renewable energy, and technology sectors may benefit from increased investment, and global diversification remains essential, given the divergence in regional growth prospects. 

Many investors are viewing 2026 as a year to plan for the future, diversify their portfolio, and regularly review their investments. Stay informed and flexible to handle changes in 2026. The friendly team at Albert Goodman Financial Planning is here to support your financial goals with expert, unbiased advice on investments, pensions and tax. 

'This article is for information only and does not constitute advice. The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.’