Comparing Automated and Legacy Workforce Strategies

The UK is particularly exposed provided its reliance on gas for electricity pricing, which is why the International Monetary Fund (IMF) has modified its UK inflation and growth projections more greatly than any other developed economy. Inflation briefly dipped below 3% for the first time since early 2025, but the reprieve will be short-term.

ANSR July UK PRs

A weaker labour market and softer demand should avoid a repeat of 2022's double-digit spike, limiting second-round effects. Our base case is inflation balancing 3.1% in 2026, peaking around 3.5%, before relieving to 2.5% in 2027, though risks loom large if the Strait of Hormuz remains closed. The UK labour market was currently softening before the newest energy shock, with joblessness rising to 5.0% and jobs at their lowest because the pandemic.

Companies are not yet shedding personnel, however unwillingness to hire is expanding the gap between task development and population growth. Higher energy costs will intensify the pressure, and we expect unemployment to peak at 5.3% by year end. With wage development slowing to around 3.75% and inflation heading towards 3.5%, real pay looks set to be stagnant another challenging year for living standards.

ANSR July UK PRs

Three elements limit the case for hikes: the energy shock is smaller than in 2022, rates are already at a limiting level, and a weaker economy decreases the risk of second-round inflation impacts. That stated, rate increases can not be dismissed if energy rates surge even more. Gilt yields are likely to stay raised regardless, driven by the UK's inflation level of sensitivity and political uncertainty around a prospective change of Prime Minister, keeping loaning expenses high across the economy even if the policy rate stays on hold.