UK growth stalls as business investment contracts, chambers warn

The British Chambers of Commerce (BCC) warned on Tuesday that a sharp slowdown in business investment will keep the United Kingdom’s economy in a prolonged "slow lane" for the remainder of 2026. The group expects overall growth to hover around one per cent for the year, with investment contributing less and less to the picture.

Why the slowdown matters

Reduced capital spending means fewer jobs, weaker construction activity and limited pressure on inflation, which the BCC still projects to peak at 3.6 per cent, above the Bank of England’s own forecasts. Unemployment is likely to edge toward 5 per cent by year‑end, eroding household confidence and consumer spending.

Forecast details and reactions

Economists surveyed by the Treasury anticipate a modest 0.2 per cent contraction in business investment this year, followed by a 0.4 per cent rise in 2027. The BCC’s own numbers suggest growth of 0.6 per cent in the first quarter and 0.4 per cent in the second, before a likely contraction in the third quarter and a meagre 0.1 per cent expansion in the final three months.

"Resilience alone will not turbocharge growth and give businesses the tools they need to power the economy," said Vicky Pryce, chair of the BCC’s economic advisory council.

Pryce added that the early‑year growth “sounds too good to be true” and warned that the modest gains will soon be “well into the rear‑view mirror”. She stressed that without a boost in private investment, the economy will struggle to break out of its current pattern that has persisted since 2022.

City analysts and independent forecasters are broadly in line with the BCC’s cautious outlook. The Treasury’s monthly monitor expects 0.2 per cent growth in Q3 and 0.1 per cent in Q4. Firms such as EY and NatWest predict larger declines in business investment, while most economists see government consumption rising about two per cent in 2026.

What comes next

Attention now turns to the Office for Budget Responsibility, which will revise its five‑year outlook ahead of the autumn Budget. The new figures will shape the fiscal headroom available to John Healey, the chancellor, and could influence policy decisions on infrastructure spending and tax relief.

The Treasury declined to comment on the BCC’s latest forecast, but the warning adds pressure on policymakers to find ways to stimulate private investment without widening the fiscal deficit.