The UK economy is edging closer to recession, which may force the Bank of England to adopt much more aggressive monetary easing.

Analysts note that key economic growth indicators in the UK remain weak. Besides, business activity and labor market data increasingly point to recessionary conditions. Experts say the economy is already showing signs of a substantial slowdown, despite only moderate job cuts so far.

Analysts highlight slowing corporate profit growth, which raises the risk of further layoffs. The UK labor market is deteriorating at an alarming pace and in many respects already looks recessionary. Experts warn that no improvements in macroeconomic data and the labor market could finally drag the economy into recession.

At the same time, inflationary pressure is easing. Wage growth has slowed, and service price dynamics are getting back on track, cementing expectations that core inflation could return to the Bank of England’s 2% target this year.

Against this backdrop, analysts expect the central bank to cut interest rates by roughly 41 basis points in 2026, with cumulative easing possibly reaching 100 basis points in 2025/26, broadly in line with current market pricing.

For investors, analysts consider the UK stock market rather attractive despite domestic economic weakness. Stocks could be supported by lower borrowing costs, a weaker pound sterling, and a high share of international revenue for many companies. Over a short‑term horizon of three to six months, analysts prefer UK equities to those in the eurozone.

They judge the UK market still trades at a discount and does not look overbought. An additional source of support could be the energy sector: analysts note that political jitters in Iran could trigger a major supply shock in the oil market.

Given the significant weight of oil and gas companies in UK stock indices, the UK market has historically outperformed the eurozone during periods of rising oil prices.