UK Economic Perspectives "UK economy - the key issues" Titareva

Research evidence excerpt

UK Economic Perspectives "UK economy - the key issues" Titareva

Global Research

21 May 2026ab

UK Economic Perspectives Economics

United KingdomUK economy - the key issues

Anna Titareva

Economist

A summary of our views on UK growth, inflation, fiscal, and monetary policy anna.titareva@ubs.com

+44-20-7568 5083

We summarise our latest views on UK growth, inflation, fiscal policy and monetary policy

following recent data releases and news flow. Despite strong GDP growth in Q1, we Reinhard Cluse

Economistcontinue to expect higher energy prices to weigh on growth in the coming quarters.

reinhard.cluse@ubs.com

Higher energy prices are also set to push inflation higher, with headline inflation now +44-20-7568 6722

expected to peak at around 3.7% y/y in November before easing again in 2027. We

believe that the BoE is now in a prolonged holding pattern, with rate cuts expected in Felix Huefner

2027, though we acknowledge the Bank’s hawkish bias, with further rate hikes

felix.huefner@ubs.com

remaining a risk. The fiscal outlook remains challenging, amid growing pressure to +49-69-1369 8280

increase defence spending and provide additional energy support, as well as the

prospect of a potential Labour leadership challenge in the coming months. Franziska Fischer

franziska.fischer@ubs.com

Politics: Potential leadership challenge in focus +41-44-239 2054

The local elections on 7 May were a focal point as a potential catalyst for a Labour Party

leadership challenge. Significant losses by Labour (a net loss of 1,229 seats), as

expected, have brought the question of a leadership challenge back into the spotlight.

None of the previously reported potential contenders (eg, Angela Rayner and Wes

Streeting) have triggered a leadership bid so far; this may provide time for Andy