KPMG UK Economists Weigh In on Spring Forecast and Bank of England Credit Data

The UK's Spring Forecast offered no surprises, and that's more or less the point. KPMG UK's economists this week sized up both the government's Spring Forecast and the Bank of England's Money and Credit statistics for January 2026, and what they found was an economy holding its breath: fiscally cautious at the top, financially strained at the bottom.

On the Spring Forecast, KPMG's read was measured. The document largely reaffirmed earlier government commitments while refreshing the Office for Budget Responsibility's core projections. The OBR is still projecting GDP growth of 1.6% in 2027, a figure that sits notably above the 1.4% consensus among many independent forecasters. But KPMG economist Selfin flagged a meaningful caveat: the OBR's assumptions around productivity gains and long-term potential growth look relatively optimistic, leaving the door open for downward revisions down the line.

The Bank of England's January 2026 data told a more immediate story. KPMG's analysis described "lingering fragility in household finances," a phrase that carries weight given what the numbers are showing. Mortgage activity started the year quietly, with borrowers prioritising financial security after what KPMG characterised as a challenging end to 2025. Even a modest improvement in expectations around lower interest rates hasn't been enough to push households into action: budget uncertainty is still delaying decisions on both new home purchases and remortgaging.

The consumer credit picture drew a pointed response from Karim Haji, Global and UK Head of Financial Services at KPMG. The uptick in borrowing, he said, "likely reflects continued pressure on household budgets rather than renewed confidence." The practical read: many families are using credit to spread the cost of seasonal expenses into the new year, not because conditions have improved but because they haven't.

Haji welcomed the recently announced reduction in the energy price cap, which is due to deliver relief from April, while being clear that it doesn't resolve the broader picture. Cost-of-living pressures, he stressed, are not going away with a single cap adjustment.

For the financial services sector, Haji's framing was direct: lenders and financial services firms are entering a pivotal period. The combination of subdued mortgage volumes, consumer credit under strain, and households navigating persistent affordability pressure will define the decisions firms need to make in the months ahead.