What should investors expect in 2026?

As we step into 2026, the economic landscape in the UK and across the globe continues to shift. UK investors face a new set of opportunities and challenges. Here, Reme Holland, partner, Albert Goodman Chartered Financial Planners, examines some key areas.

Inflation

The UK has finally seen a meaningful drop in inflation after a prolonged period of rising prices. In November 2025 inflation fell to 3.2 per cent, down from 3.6 per cent the previous month.

Most economists expect inflation to keep trending downward throughout 2026. Several factors are supporting this outlook, such as lower energy prices compared with the peaks of 2022/23, global supply chains stabilising after years of disruption, and softer consumer demand as households adjust to higher borrowing costs.

Independent forecasts also predict further moderation in inflation. However, there are still risks. Wage growth, while slowing, remains above pre-pandemic levels, and global commodity markets are sensitive to geopolitical events. Any resurgence in oil or gas prices, or renewed supply chain issues, could slow the progress on inflation. However, there are suggestions there could be an oversupply of oil in 2026, which could lead to a reduction in inflation globally.

Interest rates

The Bank of England has started to ease monetary policy, cutting the base rate to 3.75 per cent at the end of 2025, the lowest rate since early 2023. Further rate cuts are likely, but the pace will depend on how inflation evolves.

The Bank has already made policy “significantly less restrictive” after 150 basis points of cuts since August 2024. Most economists expect gradual rate reductions through 2026, with rates stabilising around 3.0–3.5 per cent by year-end.

For households and investors, this means mortgage rates should continue to ease, while savings rates may drift lower.

UK economic growth

The UK economy ended 2025 on a soft note, with GDP contracting by 0.1 per cent in both September and October and showing no growth since June. This stagnation reflects subdued consumer spending, weak productivity, and a cooling labour market.

Forecasts for 2026 suggest modest growth. Slight GDP growth is expected, though still below long-term averages. Momentum is likely to be slower due to a weakening labour market, and 2026 is set to be a year of adaptation.

Key drivers of growth are likely to include increased investment in green energy and data-centre infrastructure, a strengthening of public-sector investment as infrastructure, and a gradual recovery in household incomes as inflation falls. However, the UK still faces challenges such as low productivity growth, regional inequality, and tight fiscal conditions.

Global outlook

While the UK and parts of Europe face subdued momentum, other regions are better positioned for stronger performance.

US: The economy remains resilient, supported by strong consumer spending and labour markets, however, higher interest rates and fiscal tightening may slow growth.

Eurozone: The region continues to struggle with weak industrial output and sluggish consumer demand. Growth will likely remain modest, with inflation above the European Central Bank’s target in some countries.

China: Growth remains uncertain due to structural issues like the property-sector downturn and demographic pressures. Policymakers are expected to introduce targeted stimulus, but growth will likely stay below the rapid rates of the past decade.

Emerging markets: These economies present a mixed picture. Commodity exporters may benefit from stabilising global demand, while others face challenges from high debt and currency volatility.

What this means for UK investors

The macro backdrop suggests a period of cautious optimism. Falling inflation and lower interest rates should support both equities and bonds. Infrastructure, renewable energy and technology sectors may benefit from increased investment. Global diversification remains essential, given the divergence in regional growth prospects.

Many investors are viewing 2026 as a year to plan for the future, diversify their portfolio and regularly review their investments.

This article is for information only and does not constitute advice. The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

_{This article is for information only and does not constitute advice. The Financial Conduct Authority does not regulate estate planning or tax advice.}