UK Economy in 2026: Retail Sales Rise, Exports Strengthen and Public Finances Record Surplus

The UK economy in 2026 is stronger than many expected. Retail sales rose sharply in January. Export demand improved. The Government recorded a significant monthly surplus in public finances.

At the same time, unemployment remains elevated in certain regions. Business tax pressures are still present. Growth forecasts remain modest.

So what is really happening? And what should businesses do now?

At Apex Accountants, we look beyond headlines. Below, we break down the facts, explain the drivers, and outline practical actions for UK businesses.

Snapshot: What the latest data shows

Here is a summary of the key figures reported for early 2026:

Indicator	Latest Figure	What It Means
Retail sales growth (January)	+1.8%	Strongest monthly rise in over a year
December retail growth	+0.4%	Shows upward momentum
UK Composite PMI (February)	53.9	Activity expanding (above 50)
Public sector surplus (January)	£30.4bn	Highest January surplus on record
Self-assessment receipts	£29.4bn	£3.6bn higher than previous year
London unemployment rate	7.6%	Above national average (5.2%)

The numbers show economic momentum in spending and exports. However, the labour market remains under pressure in some areas.

Retail sales rebound: What it means for businesses

Retail volumes rose by 1.8% in January. This is significant. It suggests consumers returned to spending after a cautious end to 2025.

Why spending increased

Several factors contributed:

• Post-holiday promotions and discounting
• Slight easing in inflation pressures
• Wage growth stabilising real income
• Increased online purchasing

Non-store retail activity performed strongly. Jewellery and discretionary goods saw notable demand.

What this means for business owners

Retail growth can improve cash flow in the short term. However, this does not mean consumer confidence is fully restored.

Businesses should:

• Monitor sales trends monthly
• Review stock management carefully
• Avoid over-expansion based on one strong month
• Maintain tight cost control

Spending is improving. But it remains selective.

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Exports and private sector growth: A positive signal

The UK composite PMI reading of 53.9 indicates expansion. Any reading above 50 shows growth.

Export orders increased at the fastest pace since 2021. This supports manufacturers and internationally focused businesses.

What is driving export growth?

• Improved global demand conditions
• Competitive pricing from sterling movements
• Services sector resilience

The services sector remains the largest driver of UK economic activity. Hospitality, finance, healthcare and leisure contributed to growth.

Strategic takeaway

If your business trades internationally:

• Review export pricing structures
• Consider currency exposure management
• Assess new market opportunities

Export demand recovery can provide growth opportunities. However, global conditions remain uncertain.

Public finances surplus explained

January recorded a £30.4 billion public sector surplus. This means government receipts exceeded spending for the month.

This was largely due to:

• Strong self-assessment tax receipts
• Income tax threshold freezes
• Lower debt interest payments

Self-assessment receipts reached £29.4 billion. This was significantly higher than the previous year.

Why this matters for taxpayers

A surplus does not mean tax cuts are imminent. In fact:

• Income tax thresholds remain frozen
• Fiscal headroom is still tight
• Government borrowing levels remain historically high

Businesses and individuals should not assume immediate tax relief.

Labour market concerns: A key risk factor

While spending and exports improved, employment data presents challenges.

London’s unemployment rate has risen to 7.6%. Youth unemployment stands significantly higher.

Sectors affected include:

• Hospitality
• Retail
• Entry-level services

This creates a mixed economic environment. Strong spending data does not remove labour market pressures.

Practical actions for business owners

Economic data provides direction. But strategy matters more. Here is what we advise clients at Apex Accountants:

Cash flow first

• Review cash flow forecasts monthly
• Build contingency reserves
• Plan for tax liabilities early

Tax planning

• Assess self-assessment and corporation tax exposure
• Use available reliefs properly
• Review dividend strategy

Cost control

• Audit fixed costs
• Renegotiate supplier contracts
• Monitor payroll growth carefully

Growth decisions

• Avoid reacting to one month’s data
• Base expansion on sustainable revenue
• Stress-test projections

Short-term improvement does not remove long-term risks.

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Sector outlook summary

Sector	Current Outlook	Risk Level
Retail	Improving but cautious	Medium
Hospitality	Demand rising, labour pressure	Medium–High
Manufacturing	Export boost positive	Medium
Professional services	Stable	Low–Medium
SMEs overall	Growth modest	Medium

This environment rewards careful planning. Overconfidence can create problems.

How We Help Businesses in UK

At Apex Accountants, we support businesses through economic shifts with practical financial guidance.

Our services include:

• Corporation tax planning
• Self-assessment tax advice
• VAT compliance and strategy
• Management reporting
• Cash flow forecasting
• Virtual CFO services
• Business growth strategy
• Budgeting and forecasting

We focus on clarity, reduce risk, and help you make informed decisions.

Economic data changes every month. Strong financial structure protects your business in both good and challenging periods.

Conclusion

Early 2026 has started with encouraging signals. Retail spending has improved. Export demand has strengthened. Public finances showed a strong January surplus.

However, unemployment pressures remain. Growth forecasts are still modest. Tax burdens remain elevated.

The UK economy is stabilising. It is not booming.

For business owners, the message is clear:

• Stay disciplined
• Plan ahead
• Monitor cash closely
• Optimise your tax position

Economic momentum can support opportunity. But financial control determines long-term success.

If you would like tailored advice on how current economic conditions affect your business, contact Apex Accountants today and book a consultation.

FAQs About UK Economy in 2026

Based on current UK search trends and client discussions, common questions include:

1. Is the UK economy recovering in 2026?

There are signs of short-term improvement. Retail and exports are stronger. However, growth is expected to remain modest overall.

2. Will taxes increase again?

There are no confirmed new increases at present. However, threshold freezes continue to increase effective tax burdens.

3. Should businesses expand now?

Expansion decisions should be based on cash flow strength and sector-specific performance. Caution remains important.

4. Is inflation still a risk?

Inflation has eased from peak levels. However, cost pressures remain for energy, wages and supply chains.