S&P Upgrades UK GDP Growth Forecast on Strong Consumer Spending and Services

S&P Global Ratings has upgraded its growth outlook for the UK, citing “reasonably resilient” consumer spending and services that have helped shield the economy from the conflict in the Middle East. Real gross domestic product in Europe's second-biggest economy is now expected to climb by 1.3 per cent, up from a previous lowered prediction of 1.1 per cent, the New York-based agency announced on Friday.

Analysts noted that hospitality and professional services underpinned economic growth in the second quarter. GDP growth is projected to average 1.4 per cent from 2027 to 2029, assuming the situation in the Middle East remains “contained”. The agency also maintained the UK's long and short-term foreign and local currency sovereign credit ratings at AA.

“The stable outlook reflects our view that the UK economy has remained, and will remain, resilient in the face of the energy shock emanating from the Middle East conflict,” S&P analysts wrote, while balancing this against risks from constrained fiscal positions, elevated public debt levels, and high government spending.

S&P also highlighted the UK's policy direction under Andy Burnham, the UK's sixth prime minister in the past decade, whose government has focused on devolution, industrial renewal, and closer ties with the EU while pledging fiscal prudence. Meanwhile, UK inflation was pegged at 3.1 per cent in August, leading S&P to expect the Bank of England to raise interest rates by 0.25 basis points at its November meeting.

In a separate report, S&P noted that Egypt's economy accelerated at its fastest pace in three years, with real GDP jumping by 5.1 per cent in fiscal 2026. However, the agency cautioned that the North African nation remains vulnerable to regional conflicts and projected growth to ease to 4.5 per cent in fiscal 2027 amid trade and shipping disruptions.