The year 2025 will go down in British history as another period of deepening socio-political division and slowing economic growth. The results of the outgoing year show that Prime Minister Keir Starmer’s government has faced extremely low levels of trust, while economic indicators have faced difficult challenges that create a high degree of uncertainty for the coming year.
A key economic indicator is business activity in the private sector, which was in negative territory at the end of 2025, indicating negative trends in entrepreneurial activity and investment. The Confederation of British Industry (CBI) has recorded a sharp decline in business sentiment and weak growth in production, which appears to threaten prolonged stagnation.
This backdrop coincided with the Bank of England’s decision in December 2025 to cut its key interest rate from 4% to 3.75% in order to ease pressure on the economy, while keeping inflation above target.
In their December forecasts, CBI analysts expect moderate GDP growth of around 1.3% in 2026, but stress that this relatively favorable figure masks deep structural problems in the economy. First and foremost, this refers to the prolonged sluggishness of private investment, which remains below pre-crisis levels due to high uncertainty, an unstable regulatory environment, and the lingering effects of interest rate hikes in previous years. According to the CBI, businesses are still inclined to postpone long-term investment decisions, preferring to accumulate liquidity and cut costs rather than expand production or hire new employees.
At the same time, experts note the caution of consumers, whose real incomes continue to be under pressure due to high tax burdens, rising housing costs, and persistent service prices. Despite the formal slowdown in inflation, households are inclined to save rather than consume actively, which limits domestic demand. As a result, as the CBI points out, the projected economic growth in 2026 is fragile and unstable. It depends largely on external factors and financial incentives, but is not based on a full recovery of investment activity and consumer confidence. This is what makes the UK’s economic outlook for 2026 vulnerable to any new political or global shocks.
This scenario, “growth without momentum,” means that the UK economy could experience a slight acceleration, supported by moderate consumer spending, but facing continued business uncertainty and limited investment.
The situation looks even more acute in politics. According to analytical articles and commentary, 2025 marked the point of maximum disappointment for the electorate. The traditional British parties, Labour and the Conservatives, have lost some of their monopoly influence, while the rise of populist forces and the fragmentation of the electorate pose the risk of fundamental changes in parliamentary democracy.
The Starmer government has faced accusations of breaking its own election promises, increasing the tax burden, and failing to take sufficient measures to stimulate economic growth.
Within the ruling party itself, there are serious factional differences. In particular, the health minister is calling for a review of relations with the EU and a return to the customs union, which openly calls into question the prime minister’s official position.
One sign of growing political instability has been the debate over revising how elections are run in 2026. There’s talk of postponing local elections in a bunch of English districts, which critics say is just a way to dodge political risks. Such initiatives raise concerns that, under the pretext of administrative reforms and changes to jurisdictional boundaries, the principle of democratic accountability is in fact being undermined, and that public confidence in the electoral system, already weakened by economic and social problems, may decline even further.
Meanwhile, social tensions are mounting, especially around migration issues, as evidenced by regular reports of record numbers of illegal crossings of the English Channel.
In the political sphere, an important source of instability in 2025 was the growing role of Nigel Farage and the Reform UK party, which managed to convert voter disappointment into increased public influence. Against the backdrop of falling confidence in Labour and the Conservatives, Farage strengthened his position as an anti-establishment politician, appealing to issues of migration, the rising cost of living, and the disconnect between the elites and society. The record number of illegal crossings of the English Channel became a central element of his rhetoric, allowing him to accuse the government of failing to control the borders and ensure security, which increases pressure on the authorities and shifts public debate towards tough, emotionally charged solutions.
By 2026, Farage’s influence carries the risk of deepening the fragmentation of the political landscape. Reform UK is drawing votes away from both the Conservatives and part of the traditional Labour electorate, especially in socially vulnerable regions. This is forcing the government to respond not with strategic economic reforms, but with short-term political measures, exacerbating the crisis of confidence in parliamentary institutions. Looking ahead to 2026, Farage’s role may manifest itself either in an increase in protest voting in local elections or in a further decline in political engagement among citizens, which would be yet another sign of systemic tension in British democracy.
By the end of 2025, trade union movements in the UK are gaining momentum, which could lead to mass strikes in 2026. The newly elected leadership of the largest trade union, Unison, is calling for coordinated action against the government’s economic policies, declaring its intention to fight for higher wages and the protection of social services. This means that in 2026, the country could face a new wave of social protests and strikes, which will increase pressure on the government and the economy.
Based on current trends, several possible scenarios can be identified, each with its own socio-political and economic consequences.
In the “moderate recovery amid stability” scenario, the government shifts its focus to reforms aimed at strengthening business and consumer confidence. Banking policy remains accommodative, and the government introduces incentives for investment in innovation and infrastructure. GDP growth remains at around 1.2-1.4%, and inflation gradually declines towards the target level. This creates moderate economic improvement and reduces social tensions.
The “Stagnation and Political Stalemate” scenario assumes that if businesses do not believe in growth prospects, investment remains low, and consumption does not accelerate, the UK economy could face prolonged stagnation, with GDP growth falling below 1%. Increased union pressure, growing protests, and electoral instability could lead to reform paralysis, increased fragmentation of the party system, and a decline in confidence in parliamentary democracy as a whole.
The most risky scenario, “political turbulence and social unrest,” assumes that protests will grow amid an economic slowdown, trade unions will intensify strikes, and not all voters will be satisfied with traditional parties. In this case, local and regional elections in May 2026 could show significant growth in support for marginal or radical forces, leading to a restructuring of the political landscape and increased political uncertainty.
For the UK, 2025 was a year of mounting structural problems, both economic and political. Economic growth remains weak, and political confidence remains low. 2026 could be a decisive year: either the country will find ways to achieve a soft recovery and stabilization, or it will face deepening socio-political instability and economic stagnation, which will threaten the sustainability of previous models of governance and economic growth.