The UK economy grew by 0.4% in the second quarter of 2026, according to official data released on 13 August, extending a stronger-than-expected first half of the year despite pressure from higher energy costs and geopolitical uncertainty.
Gross domestic product also rose by 0.3% in June after showing no growth in May. The monthly result was stronger than economists surveyed by Reuters had expected and helped leave the UK on course to record the fastest first-half growth among the G7 economies.
Services Drive the Quarterly Expansion
The Office for National Statistics published its first quarterly estimate for April to June on 13 August. The release showed that services remained the main engine of growth, while industrial production and construction were weaker.
Reuters reported that services output increased by 0.4% in June. Consumer-facing activity was helped by warm weather and spending linked to the men’s football World Cup, while a temporary easing in energy-market pressure also supported activity during the month.
The second-quarter figure was slower than the 0.6% expansion recorded in the first three months of 2026, but it was still resilient against a difficult backdrop. Higher oil and gas prices connected with the conflict involving Iran had raised concerns that businesses and households would cut spending more sharply.
Business Investment Adds to the Picture
The ONS release calendar also scheduled provisional business investment figures for the same day, making investment an important part of the wider assessment of the economy. Reuters said the recent expansion had been supported by consumer spending and business investment rather than by a surge in government expenditure.
For companies, the distinction matters. Headline GDP can rise for many reasons, but investment provides a clearer signal of whether firms are still willing to commit capital despite uncertainty over energy costs, borrowing conditions and the autumn fiscal outlook.
Thomas Pugh, chief economist at RSM UK, told Reuters that the economy appeared to have weathered the recent energy shock better than expected, although he cautioned that growth was likely to slow later in the year.
Costs Remain the Main Constraint
The stronger data do not remove the pressures facing businesses. Energy prices remain elevated, inflation is still a concern and companies are waiting for more detail on the government’s autumn Budget.
Prime Minister Andy Burnham has already acknowledged the high cost of doing business and indicated that further support, including possible changes to business rates, will be considered within the government’s fiscal constraints. British Business Review examined that position earlier this week in its report on business support ahead of the autumn Budget.
That makes the latest GDP data encouraging but not decisive. The economy entered the second half of 2026 with more momentum than many forecasters expected, yet businesses still face a combination of energy costs, potential tax changes and uncertain global demand.
Markets Take a Cautious View
Sterling held broadly steady after the data and was on course for a third consecutive weekly gain, according to Reuters. The reaction suggested that investors welcomed the stronger growth figures without treating them as evidence that the UK’s underlying inflation and policy challenges had disappeared.
The next test will be whether the resilience seen in the first half can continue once temporary boosts from weather, sporting events and lower short-term energy pressure fade. For business leaders, the more useful signal will be whether investment, hiring and domestic demand remain firm into the autumn.
Sources: Office for National Statistics; Reuters; The Guardian.
