The UK economy grew by 0.4% in the second quarter of 2026, according to official figures from the Office for National Statistics (ONS), marking a slowdown from the 0.6% expansion in the first three months of the year. The June GDP increase of 0.3% exceeded expectations, driven by a surge in hospitality and leisure activity linked to the FIFA World Cup and record hot weather.
The services sector led growth, expanding by 0.5%, while construction output rose by 0.3%. However, production output showed no growth, and real GDP per head increased by 0.4% in the last quarter, up 1.0% year-on-year. The ONS described growth as “relatively robust” despite ongoing pressures from the Middle East conflict, which has driven up energy prices and disrupted trade routes.
Business investment rose by 1.7% in Q2, defying forecasts of a 0.5% decline in a Reuters poll. This contributed to the UK maintaining the fastest growth rate among G7 nations for a second consecutive quarter, with an annualized growth rate of 2% over the first half of the year. However, economists warn of downside risks, including higher fuel costs and persistent inflation, which could dampen consumer spending in the coming months.
The Iran war’s impact on global oil supplies—particularly through disruptions in the Strait of Hormuz—has raised concerns about long-term economic stability. The International Monetary Fund (IMF) previously warned that the conflict could hit UK growth harder than any other advanced economy, given the country’s reliance on oil and gas imports. Treasury officials have presented worst-case scenario modeling to Prime Minister Andy Burnham, suggesting growth could slow to 0.3% in 2027 if trade disruptions persist.
Chancellor John Healey acknowledged the economic strain caused by the conflict, stating that the government is taking an “active, hands-on” approach to support households and businesses. He reiterated the government’s commitment to “growth in every postcode”, a key pledge from Prime Minister Burnham. Meanwhile, Deutsche Bank’s chief UK economist, Sanjay Raja, noted that while some slowdown is likely, there are “modest upside risks” emerging from stronger-than-expected business confidence.
The ONS data also revised down previous estimates, showing no growth in May (previously reported as 0.1%) and a 0.1% contraction in April. The June rebound was attributed to football-related spending, outdoor dining, and advertising revenue tied to the World Cup. However, economists caution that these temporary boosts may not be sustainable amid rising energy costs and geopolitical uncertainty.
As the UK navigates post-conflict economic challenges, policymakers face a delicate balance between stimulating growth and managing inflationary pressures. The coming months will be critical in determining whether the current resilience can withstand the prolonged impact of the Iran war and global supply chain disruptions.