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The UK economy grew by 0.1 percent in May 2026 after shrinking by 0.1 percent in the previous month. Although there were signs of momentum building in the UK economy at the start of the year, the Iran War led to a 0.5 percent downgrade in annual growth, with inflation expected to be 1.5 percent higher. 

Labour banking on growth to turn around fortunes 

In December 2025, just over a year and a half after winning the last general election, the approval rating for the new Labour government was lower than the previous government, at -60 percent. Furthermore, the Prime Minister, Keir Starmer, is far less popular than other major political figures in the UK, while Labour have fallen far behind Reform UK in opinion polls. This sharp decline in popularity began shortly after winning the election due to several damaging policies, especially the withdrawal of the winter fuel allowance for some pensioners. While Labour aims to restore the UK's economic and political credibility in the long term, they will certainly hope for some good economic news sooner rather than later.

Economy bounces back in 2024 after ending 2023 in recession

Due to two consecutive quarters of negative economic growth, in late 2023 the UK economy ended the year in recession. After not growing at all in the second quarter of 2023, UK GDP fell by 0.1 percent in the third quarter and then by 0.3 percent in the last quarter. For the whole of 2023, the economy grew by 0.4 percent compared to 2022, and for 2024, grew by 1.1 percent. During the first two quarters of 2024, UK GDP grew by 0.7 percent, and 0.4 percent, with this relatively strong growth followed by zero percent growth in the third quarter of the year. Although the economy had started to grow again by the time of the 2024 general election, this was not enough to save the Conservative government at the time. Despite usually being seen as the best party for handling the economy, the Conservative's economic competency was behind that of Labour on the eve of the 2024 election.