NIESR lowers the UK's 2026 growth forecast to 0.9% (prev. 1.4%) and raises its inflation forecast to 4.7% (prev. 3.3%) at the start of 2027; the BoE may have to respond with big rate hikes if energy disruption is prolonged

The NIESR's downward revision of the UK's 2026 growth forecast and upward adjustment of inflation highlights deteriorating economic conditions.

Newsquawk StaffPublished 28 Apr 2026, 23:25 UTCOn the live feed at 23:05 UTC — 1 more headline followed before this page went public

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NIESR lowers the UK's 2026 growth forecast to 0.9% (prev. 1.4%) and raises its inflation forecast to 4.7% (prev. 3.3%) at the start of 2027; the BoE may have to respond with big rate hikes if energy disruption is prolonged

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The UK would face recession and inflation of 5% in a more adverse scenario in which oil prices spike to around USD 140/bbl and Hormuz remains closed.
The Middle East shock will also worsen the UK’s public finances. Relative to the OBR's outlook, debt-servicing costs are likely to be higher, growth weaker, and pressure greater for additional support to compensate vulnerable households.

Context

This shift suggests potential challenges for the Bank of England, increasing the likelihood of significant rate hikes if inflationary pressures persist, especially linked to energy disruptions in the Middle East. Market participants should watch for implications on GBP valuation and fixed-income response as investors reassess growth-inflation dynamics.

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