Is 2026 The Year Things Start to Get Better?
This essay is part of our New Year's series on what to expect in 2026 and can be downloaded as one compiled PDF via the download form. Thank you!
By Liz Morley, Founding Partner at 5654 & Company
After the November Budget, optimism about the UK’s prospects feels unfashionable. The political climate is fractious, growth is weak and confidence is brittle. Yet the question remains: could 2026 finally be the year things start to get better?
The UK faces familiar structural challenges - an ageing population, rising defence commitments, slow progress on clean energy and overstretched expensive public services. But these are solvable problems. What the UK lacks is not potential, but consistency and certainty.
Our strongest sectors - finance, tech, creative industries and advanced manufacturing niches - depend on openness: to global talent, ideas and investment. Yet the UK still has too few internationally scaled, highly productive firms. Without further deregulation, world-class infrastructure, more flexible planning rules and a more welcoming approach to skilled migration, that will not change.
The geography of our economy also remains a handbrake on national prosperity. Manufacturing output is weak, but it still underpins many regions. Too many second-tier cities have not been modernised to support the UK’s comparative advantages, leaving local economies stuck in low-growth cycles. And our devolution policy is still a muddle with local authorities having scarce resources.
Energy costs continue to hold Britain back. Reliance on gas and the high capital cost of clean energy investment keep bills elevated. The only credible path to cheaper, stable energy is to finish the transition to low-carbon power - but to do so with a clearer, more disciplined strategy than we’ve seen so far. Nuclear appears to be an expensive option when we are already investing in wind, solar and biomass.
Meanwhile, the foundations of investment have eroded. Transport and utilities are congested, not because the challenges are new but because successive governments failed to push regulators or invest directly. Promised deregulation is slow, and businesses are responding to higher employer taxes and wage mandates by freezing hiring. The OBR now expects business investment to fall for the first time in six years and weaker economic growth.
Inflation has also been nudged upward by cost-raising policies and quick fixes like fare freezes or temporary energy rebates do little to rebuild confidence.
So, will 2026 be a turning point? It could be - but only with a shift in mindset. Britain has world-leading capabilities in AI, research, finance and innovation. It could be Europe’s most attractive investment destination. But to get there, we need a stable energy plan, serious infrastructure delivery, credible fiscal choices and a regulatory environment that rewards risk-taking rather than punishes it. We could even aim to build a premium public sector if the state is going to dominate the economy – introducing new efficiencies and learning from the Scandinavian model.
The UK’s problems are not mysteries, and they are not permanent. With clarity and resolve, 2026 could mark the start of something better. Without them, it will look much like the years before it. And with a back-end loaded budget the second half of the decade could be further depressed.