What's happened
GDP has grown 0.4% in Q2, with private sector strength and services leading the rebound. Growth remains vulnerable to energy prices and Middle East tensions as inflation stays elevated. Forecasters expect solid 2026 overall, but risks persist.
What's behind the headline?
Key points
- GDP has expanded in Q2, suggesting resilience despite global headwinds.
- Services stay the main driver, with hospitality and professional sectors contributing to growth.
- Energy prices and higher inflation remain the primary risks to ongoing momentum.
What this means
- Households may face ongoing cost-of-living pressures as energy bills stay elevated.
- Businesses should prepare for potential volatility in energy costs and supply chains amid regional conflicts.
- Policy makers are watching inflation dynamics closely as they calibrate fiscal/support measures.
Implications
- The economy is not immune to international shocks, but current data indicates a more robust private sector contribution than feared.
How we got here
The UK economy has faced headwinds from higher energy costs and geopolitical tensions in the Middle East. Recent data shows a 0.4% q/q expansion in Q2, supported by services and private investment, while energy-price pressures threaten household disposable incomes and overall demand.
Our analysis
- CNBC: UK GDP growth 0.4% in Q2; energy price pressures remain a risk. - The Guardian: GDP momentum and policy responses; growth at risk from energy costs. - Independent: Treasury modelling shows potential slower growth in 2027 if energy prices persist.
Go deeper
- Will energy prices continue to weigh on growth into Q3?
- How might households shield themselves from rising utility costs?
- What policy steps could the new government take to sustain momentum?
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