Latest forecast point to a sharp slowdown in economic growth next year - but with inflation and interest rates also falling

The economy is forecast to slow next year, in a fresh challenge for Labour .

Professional services giant KPMG predicts the UK economy will grow by 1% in 2026, down from an expected 1.4% this year. It also expects unemployment to rise to 5.2% next year, and wage growth to drop back to around 3%.

In its update, KPMG also warned household spending would be hit by the extension of the freeze on income tax thresholds announced in the Budget .

Yael Selfin, chief economist at KPMG UK, said: “The outlook for growth in 2026 is subdued, reflecting the impact of a cooling labour market and weak household spending. But there are pockets of strength emerging in the for

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