The UK economy expanded by 0.4% in the second quarter of 2026, slowing from growth of 0.6% in the first three months of the year but remaining resilient amid international and domestic uncertainty.
Emeritus Professor Joe Nellis, Head of Economic Research at accountancy and advisory firm MHA, said the figures show an economy continuing to withstand significant global headwinds, including trade conflict and geopolitical volatility, alongside a period of political turbulence at home.
However, forecasts indicate that momentum is likely to ease further during the second half of 2026, placing increasing pressure on the new Chancellor ahead of the October Budget.
Consumer spending remains constrained, while businesses are continuing to adjust to higher operating costs. Investment is also vulnerable to uncertainty surrounding future taxation, regulation and ongoing tensions in the Middle East.
Professor Nellis said the Government must provide greater clarity over its tax and spending plans, while creating conditions that support business investment and tackle the UK’s persistent productivity challenge.
“In recent years, constant speculation in the run-up to the Budget has fuelled uncertainty and encouraged firms to delay major decisions,” he said. “Prime Minister Burnham and his Government must learn from this, acting quickly and decisively to set out a clear economic direction and give businesses the confidence they need to invest and grow.”
A renewed commitment to the fiscal rules followed by former Chancellor Reeves would, he suggested, offer reassurance to both financial markets and businesses that spending measures will remain within the Treasury’s means.
With public sector finances already under severe strain, there is limited scope for a substantial fiscal stimulus. This makes policies designed to strengthen private-sector confidence all the more important.
Professor Nellis added that concerns remain over the prospect of tax rises being used to fund initiatives already announced by the Prime Minister. Among the measures being discussed, wealth taxes could risk driving wealth and job creators out of the UK, while aligning capital gains tax with income tax could discourage retail investment at a time when the London Stock Exchange needs greater support.
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“Tax rises may be unavoidable,” he said. “If they are, the Government must minimise uncertainty and allow businesses to plan for the future. This is something that has been sorely lacking over the last decade.”
MHA has offices across the UK, including locations in Edinburgh and Aberdeen.
