Director Weekly  The UK economy has proven more resilient than expected during 2026 but the Chancellor mustn’t take growth for granted as he prepares for his first Budget

The latest official figures showed monthly GDP growth of 0.1% in August, and 0.7% growth over the quarter.  The numbers are “a sign of resilience in the UK economy that some had not expected,” argued the Chancellor, John Healey.

That resilience has also been highlighted by the IoD Directors’ Economic Confidence Index. Our latest data showed a 15-point improvement in directors’ expectations for their own organisations in September, rising to +5 from -10 in August. Underlying expectations rose again too, with revenue expectations rising from +12 to +21 month on month.

Yet those improvements were juxtaposed against falling optimism about the outlook for the economy as a whole, which dropped from -49 in August to -54 in September.

It is this contrast that supports the story of resilience. The Iran war that erupted in February could have badly derailed the economy, but UK businesses are navigating difficult circumstances effectively.

The IMF’s latest World Economic Outlook report reinforces the point. It has upgraded its forecasts for UK growth to 1.3% this year (from 1% forecast in July). That would make the UK the second-fastest growing economy in the G7.

The IMF’s analysis also suggests that the UK’s performance has been buoyed by increasing business investment, including in AI.

Yet as the IMF has also highlighted, the risks facing the global economy are increasing, and the resilience is fragile. The biggest concern is energy. A deteriorating situation in the Middle East has already led to price rises over recent weeks and shipping and energy infrastructure are again under threat. Higher costs will drive higher inflation and higher interest rates – putting at risk the very investment which has supported resilience.

Another concern is the risk that a major correction in AI-related assets unleashes financial market turbulence and erodes an important counterbalance to the Middle Eastern drag on growth. “The consequences… could be global,” as the IMF puts it in its latest Global Financial Stability Report. Beyond the US, Asian markets would be particularly exposed.

Moreover, the impact of any major disruption could be magnified because of the extraordinarily high level of government debt globally. The IMF has singled out the UK for praise, with managing director Kristalina Georgieva commenting that “The UK is actually one country where action to reduce debt and deficit has been taken decisively.” But borrowing has soared in the US and China. France is teetering on the verge of a debt crisis – and other nations are not far behind. That limits the scope for governments to prop up the world economy in the event of a crisis.

Despite the UK’s resilience, John Healey’s faces yet another difficult backdrop to his first Budget as Chancellor. He faces tough choices over how to deliver on promises to provide voters and (some) businesses with breathing space, while protecting the stability of the public finances and supporting growth. The concern is that the growth priority will again fall behind the others, if he once more adds to the overall tax burden on business and investors.

There are major questions about where growth fits into the government’s priorities under Andy Burnham, too. The Prime Minister has set out numerous long-term ambitions, such as around social care reform, rewiring the state, the EU relationship, and increasing public control of utilities, transport and housing. But the fruits of those reforms will be many years in the making. How to stop growth withering on the vine before we get there is the big test.

This week’s better-than-expected GDP numbers are welcome, but the UK’s economic resilience cannot be taken for granted.

Read more about the latest data from the IoD Directors’ Economic Confidence Index here.