The UK economy faces a slowdown test, and Morgan Stanley's latest insights are worth noting

Morgan Stanley strategist Bruna Skarica recently published an in-depth analysis, pointing out that the UK economy may struggle to maintain its current growth rate by 2026, with growth momentum facing clear easing pressures. Although short-term risk factors are relatively balanced, multiple data points have begun to send pessimistic signals.

**Weak Construction Sector Performance and Declining Economic Vitality**

This week's release of UK Construction PMI data further confirms this trend. According to Bruna Skarica's observations, despite a rebound before the budget announcement, the overall survey results continue to reflect a weak economic activity. As a barometer of the economy, the softness in the construction sector suggests that a broad slowdown in economic growth may already be a foregone conclusion.

**Clear Path for the Central Bank's Rate Cuts, Markets Have Already Priced In**

Morgan Stanley predicts that the Bank of England will complete its rate-cutting cycle before June, ultimately lowering the benchmark interest rate to 3.0%. More notably, market pricing data from the London Stock Exchange shows that investors have fully absorbed these expectations— a 25 basis point rate cut in the first half of 2026 is almost a market consensus, and the possibility of further rate cuts in the second half has also been widely priced in.

This phenomenon of pre-absorbing expectations reflects the market's deep recognition of the easing trend in UK economic growth, and also indicates that policymakers and market participants are forming a pessimistic consensus about the economic outlook.