{
  "id": 8789941,
  "title": "UK economy set to grow despite rising energy costs",
  "url": "https://urgent.news/2026/09/20/uk-economy-set-to-grow-despite-rising-energy-costs",
  "topic": "finance",
  "section": "Finance & Markets",
  "published": "2026-09-20T23:01:00.000Z",
  "source": {
    "name": "City AM",
    "slug": "city-am",
    "url": "https://www.cityam.com/uk-economy-set-to-grow-despite-rising-energy-costs/"
  },
  "original_language": "en",
  "account": "The UK economy is expected to expand in 2026, according to KPMG's latest economic outlook, although rising energy costs and increased borrowing will impact activity in the second half of the year. KPMG predicts the economy will expand by 1.3 percent this year, following warmer weather that boosted household spending and businesses' investment in technology. The firm also anticipates a 1.4 percent growth in 2027. However, spending is projected to decelerate in the latter half of the year as households grapple with escalating energy bills and sluggish wage growth. Yael Selfin, chief economist at KPMG UK, stated that households' spending capacity may face mounting pressure. \"The longer-term challenge is sustaining stronger growth given the diminishing contribution from an expanding workforce.\" Energy prices are anticipated to drive inflation higher, as Iran's conflict continues to affect the market. Ofgem's energy price cap is expected to rise by around four percent in October, with the government's VAT reduction on household energy bills likely only partially offsetting the increase. The Bank of England is also expected to raise interest rates in the coming months to curb higher energy prices, a weaker labor market, and subdued domestic inflation. The Monetary Policy Committee (MPC) recently kept rates at 3.75 percent but may raise the base rate to 4 percent during the November meeting. The Chancellor faces a fiscal challenge in the upcoming Autumn Budget, with limited ability to provide substantial support for growth and the cost of living. Rising borrowing costs as a result of the Iran war have reduced the £23.6 billion of headroom recorded in the Spring Forecast by approximately £9 billion. KPMG also estimates that increasing capital spending in England's seven most underfunded regions, including the Midlands and the North East, could help bridge the productivity gap and promote robust long-term growth. Selfin noted that significant public investment could play a vital role in narrowing the UK's longstanding regional economic disparity, especially in areas where infrastructure gaps are hindering productivity. KPMG estimates that investing around £47 billion in these regions could bring them up to the present national average level of capital and generate £25 billion in GDP over five years.",
  "summary": "The UK economy is forecast to grow in 2026, but rising energy bills and higher borrowing costs will weigh on activity in the second half of the year. The economy is set to grow 1.3 per cent this year, according to KPMG’s latest economic outlook, after household spending was “supported by warmer weather” while businesses [...]",
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}