AI and defence investment lifts UK outlook |
| KPMG has upgraded its UK economic growth forecast to 1.5% for 2026, up from 1.2% last year, slightly ahead of the eurozone's projected 1% growth. The firm said investment in AI, defence and infrastructure would support the economy as households become more cautious amid rising prices and concerns about job security. KPMG expects inflation to average 3.2% this year before easing to 3% in 2027, but warned that further energy price shocks could undermine the recovery. The Bank of England expects inflation to peak at nearly 5% next year. Meanwhile, BDO's output index, measuring services and manufacturing activity, climbed to 100.46 in October, its highest level since July 2022, while business optimism reached a two-year high. However, BDO's employment index remained in negative territory at 93.12, indicating continued weakness in hiring intentions, headcount and labour demand, despite a slight improvement during the month. |
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