KPMG Economist Warns Geopolitical Tensions Threaten UK Business Growth Despite Q1 Gains

Despite the UK economy expanding by 0.6% in the first quarter of 2026, KPMG Chief Economist Yael Selfin warns that geopolitical tensions, particularly the conflict involving Iran, pose significant risks to future business growth. While recent official data indicates resilience, Selfin highlights that rising energy bills, petrol prices, and grocery costs are squeezing household disposable income, likely leading to weaker consumer spending. Businesses face compounded challenges from elevated operating expenses and increased borrowing costs due to financial market unease. Consequently, many firms may defer investments, prioritizing cash preservation over expansion. This cautious stance, combined with softening demand, is expected to slow GDP growth in the second quarter as the full impact of supply chain disruptions and commodity price hikes materializes. The analysis underscores the fragility of the current economic recovery against external shocks, suggesting that without targeted policy support or adaptive business measures, momentum could stall. Attention now shifts to upcoming inflation data and Bank of England decisions as the UK navigates these dual pressures on consumers and producers.