· 5 min read
Is the UK economy growing?
Technically yes. UK GDP has been positive through 2025 and into 2026. But growth has been thin, real living standards have not recovered to their pre-2021 levels, and the gap between the headline number and the household experience remains wide.
Yes, the UK economy is growing. GDP has been positive through 2025 and into 2026, with the ONS confirming growth in each of the past several quarters. The headline answer is straightforward. What it means for businesses, households, and investors is considerably more complicated, because the economy can grow in aggregate whilst living standards stagnate and household financial resilience deteriorates. That is the current UK situation.
What the GDP numbers actually show
UK GDP growth has been running at 0.1 to 0.3 percent per quarter through 2025 and early 2026. Annualised, that puts the UK on a growth trajectory of roughly 0.5 to 1.2 percent, depending on which quarter you measure. That is below the long-run UK average of around 2 percent, and below the performance of most comparable economies over the same period. The UK is growing. It is not growing quickly, and the margin above zero is narrow enough that a single negative quarter would reignite recession talk.
The OBR and Bank of England both forecast annual GDP growth of 1 to 1.5 percent for 2026 as a whole. That figure is broadly consistent with what the data has shown so far this year. It is not a recessionary forecast. It is also not a recovery forecast. It is a stagnation forecast: an economy moving forward too slowly to generate the employment growth, real wage recovery, and business investment that would indicate a genuine expansion.
GDP growth versus real living standards
The most important distinction in any discussion of UK economic growth is between GDP as an aggregate and GDP per capita. The UK population has grown steadily through immigration and natural increase. An economy that grows at 1 percent while the population grows at 0.7 percent is improving average living standards by only 0.3 percent per year. On that measure, UK real GDP per capita has been broadly flat to slightly negative for much of the period since 2022.
What this means practically is that the economy is producing more output overall, but the average person is not materially better off than they were two to three years ago. Real household disposable income, which takes account of inflation and tax, has been recovering from its 2022-2023 trough but remains below the pre-2021 baseline for most income groups. Growth is happening. It is not being widely felt.
Which sectors are growing and which are not
UK GDP growth in 2025 and 2026 has been driven primarily by services, particularly financial services, professional services, and public sector activity. Manufacturing output has been under pressure from the combination of weak European demand, ongoing supply chain friction, and the cost impacts of the April 2025 employer National Insurance increase. Construction has been subdued, constrained by planning bottlenecks and the still-elevated cost of materials and labour relative to pre-2021 levels.
Consumer-facing services, including retail, hospitality, and leisure, have been growing nominally but declining in volume terms once price effects are stripped out. Consumers are spending more pounds but buying less. That pattern is consistent with an economy growing in cash terms but not in real activity terms, particularly in the sectors most sensitive to household financial conditions.
The leading indicators: what happens next
The forward-looking picture is cautious rather than pessimistic. Consumer confidence, as measured by GfK, stands at -23 as of May 2026: deeply negative and inconsistent with consumer-led growth acceleration. The labour market has been loosening, with unemployment rising from its 2022 low of 3.5 percent to above 4.5 percent, removing one of the stabilising forces that sustained consumption through the inflation shock.
On the positive side, the Bank of England rate-cutting cycle is gradually reducing the mortgage cost burden on households, which should improve disposable income over 2026 and 2027. Real wages are positive, meaning nominal pay growth is outpacing inflation. These factors point toward a slow improvement in household financial conditions rather than an imminent contraction. Whether that improvement is fast enough to lift GDP growth above its current thin-positive trajectory is the central question.
For the full picture on whether the UK might tip into recession, see our notes on whether the UK is currently in a recession and whether the UK is heading for recession in 2026. CPIx, Briefed's composite consumer pressure index, tracks the household conditions that lead GDP by one to two quarters. The Briefed daily briefing covers each ONS GDP release and what it means, weekdays at 6:45am. Free to read.