Geopolitical Tensions Deepen the UK’s Stagflation Challenge

NatWest’s latest “Britonomics” report examines how rising geopolitical tensions, energy shocks, and persistent inflation pressures are complicating the UK’s economic outlook.

• UK firms are signaling stagflationary conditions, with 57% expecting to raise prices while weakening demand and softer employment expectations weigh on growth.
• The UK services sector slipped into contraction territory in May, while policymakers warn that renewed energy shocks could require further monetary tightening.
• Despite higher mortgage rates, credit demand and housing activity remain relatively resilient, while the UK’s net-zero economy continues to expand across regions.

The report offers deeper insight into how inflation, policy risks, and structural investment trends are shaping the UK economy’s next phase.