UK economy holding up against Middle East conflict pressure, but second half of 2026 looks harder, CBI warns

CBI Senior Lead Economist Ben Jones says stronger-than-expected growth has cushioned the blow so far, but rising energy bills, higher borrowing costs and global market volatility are set to make conditions tougher for the rest of the year.

The UK economy has proved more resilient to the fallout from the Middle East conflict than initially seemed likely — but the second half of 2026 is shaping up to be considerably harder. That’s the assessment posted by the Confederation of British Industry this week, quoting Ben Jones, CBI Senior Lead Economist, who warned that higher household energy bills, volatile global energy markets, a sell-off in bond markets and rising borrowing costs are all bearing down on the outlook.

The figures show just how much ground has already been lost. CBI forecasts project UK GDP growth of around 1.1 per cent in 2026, down from about 1.4 per cent the previous year, and falling further to 0.9 per cent in 2027. Unemployment looks set to climb to around 5.5 per cent — roughly two million people — representing an increase of about 200,000 compared with earlier levels. Office for National Statistics data confirm that quarterly GDP growth had already slowed to around 0.1 per cent in the final quarter of 2025, leaving annual growth at about 1.0 per cent before the current pressures fully took hold.

So what does “resilient” actually mean here? The CBI’s own earlier commentary described the recovery as “far from secure” even before the Middle East conflict escalated, with growth in the three months to February 2026 stronger than expected but the broader picture still one of subdued momentum. The resilience Ben Jones refers to is relative — better than feared, not better than fine.

For Kent households and businesses, the pressures are practical and immediate. Rising petrol prices and domestic energy bills, both linked to global energy-market volatility according to the House of Commons Library, are eating into disposable income and pushing up business costs. Firms relying on transport along the M2 and M20 corridors and cross-Channel routes face higher fuel bills, while those carrying variable-rate debt are exposed to the borrowing-cost increases Jones flagged. CBI forecasts pointing to weaker growth and rising unemployment nationally suggest that consumer-facing sectors — retail, hospitality, logistics — could feel the strain most sharply in the months ahead.

Policy uncertainty adds another layer of risk. Decisions around the Autumn Budget could influence central government funding for local infrastructure and business-support schemes, affecting planning at Kent County Council and district level. But without Kent-specific GDP or unemployment figures for 2026, the precise local scale of any slowdown remains unverified at this stage.