Britain’s economy grew by 0.4% between April and June, delivering a stronger-than-expected final month before an anticipated autumn slowdown tests Andy Burnham’s new government.
Figures published by the Office for National Statistics show that gross domestic product increased for a seventh consecutive three-month period. The second-quarter expansion followed growth of 0.6% during the first three months of 2026.
June provided the surprise. Monthly GDP increased by 0.3% after no growth in May and a 0.1% contraction in April. Economists surveyed by Reuters had expected the economy to record no growth during June.
The improvement means Britain is on course to have produced the strongest first-half performance among the G7 group of major advanced economies. However, the Bank of England and independent economists warn that the headline figures disguise much weaker underlying momentum.
The Bank expects underlying growth to fall from approximately 0.1% to around zero during the third quarter as renewed conflict involving Iran, elevated energy prices and uncertainty before the October Budget weigh upon households and businesses.
Services drive the economy forward
The services sector, which accounts for the majority of the British economy, expanded by 0.5% during the second quarter. Construction increased by 0.3%, while production output recorded no growth.
Information and communications was the strongest part of the services economy, increasing by 2.7%. Within that category, computer programming, consultancy and related work grew by 3.7%.
Professional, scientific and technical activities increased by 1.7%. Advertising and market research rose by 4.3%, scientific research and development by 3.9%, and legal activities by 2.5%.
Manufacturing output grew by 1%, helped by a 4.2% rise in pharmaceutical production and a 3% increase in the manufacture of computer, electronic and optical products.
There were also signs of resilience in everyday spending. Consumer-facing services grew by 0.3% across the quarter, with accommodation increasing by 3.9% and motor-related wholesale, retail and repair activity rising by 1.8%.
Overall, 15 of the economy’s 20 broad subsectors expanded. Real GDP per person also increased by 0.4% during the quarter and was 1% higher than during the same period in 2025.
World Cup, sunshine and a temporary ceasefire
The June increase was driven by a 0.4% expansion in services, which outweighed falls of 0.2% in production and 0.1% in construction.
The ONS said some food and alcoholic-drink manufacturers, television producers and advertising businesses reported increased activity linked to the men’s football World Cup. Retailers and some manufacturers also benefited from the unusually hot weather.
A temporary ceasefire in the conflict involving Iran provided businesses with a period of relative respite from the energy shock. Fewer companies reported disruption from the conflict during June than in earlier months.
That support may prove temporary. The ceasefire has since ended, while uncertainty surrounding oil supplies and the Strait of Hormuz continues to affect energy prices.
Why economists expect growth to slow
The Bank of England had expected second-quarter growth of 0.3%, meaning today’s initial estimate was slightly better than its forecast. The central bank nevertheless believes the underlying rate of expansion was only around 0.1% once temporary factors are removed.
Its July Monetary Policy Report projects underlying GDP growth of approximately zero during the third quarter because the effects of the conflict are expected to weigh more heavily upon activity.
Higher wholesale energy costs can pass through to household bills, transport, manufacturing and almost every business supply chain. They can simultaneously weaken economic growth and raise inflation, leaving the Bank with less room to reduce interest rates.
The British Chambers of Commerce has forecast annual GDP growth of 0.9% for 2026 and 1% in 2027. It expects business investment to fall by 2.2% this year and inflation to reach 3.8% by the end of 2026.
Those projections pre-date today’s slightly stronger quarterly result, but they illustrate the difficult background confronting the Government. Stronger activity during the first half does not remove the pressure created by energy prices and weak investment.
Construction remains below last year
The detail also contains areas of weakness. Although construction increased by 0.3% during the quarter, output remained 2% lower than a year earlier.
Production was flat across the three months, with manufacturing growth offset by falls in electricity and gas supply and in water, sewerage and waste-management activities.
Administrative and support services declined by 0.9%. Security and investigation activities fell by 7.9%, while office administration and other business-support work decreased by 2.8%.
Monthly figures should also be treated cautiously. Today’s release revised May’s previously estimated 0.1% growth down to zero, demonstrating how early GDP estimates can change when more complete information becomes available.
The test for Burnham and Healey
The second quarter largely predates Burnham’s arrival in Downing Street. It therefore describes the economy inherited by the new Prime Minister rather than the result of policies introduced by his administration.
The figures offer Burnham and Chancellor John Healey some encouragement: Britain entered the summer with growth continuing, output per person rising and businesses responding to unexpected opportunities.
They also sharpen the political test facing the Government. Burnham has promised measures to reduce costs for households and businesses, while Healey will deliver his first Budget on 28 October.
The Chancellor must decide how far the Treasury can support families and energy-intensive companies without increasing borrowing or creating the need for tax rises elsewhere. Speculation about possible Budget tax changes could itself encourage businesses to delay investment and households to postpone major purchases.
Burnham’s emerging cost-of-living programme includes action against subscription traps and misleading discounts, alongside previously announced measures affecting household energy and transport. Those interventions may reduce particular costs, but they cannot by themselves neutralise a major external energy shock.
A strong first half is not a guarantee
The fairest reading of the figures is that the British economy has so far proved more resilient than many forecasters feared.
Quarterly growth of 0.4%, a positive result for GDP per person and an unexpectedly strong June are genuine improvements. It would be misleading to describe the economy as contracting or already in recession.
It would be equally premature to assume that the pace will continue. Part of June’s expansion came from temporary benefits associated with the World Cup, hot weather and a ceasefire which no longer holds. The energy shock, inflation risk and October Budget are still ahead.
Burnham has inherited an economy with forward movement—but very little margin for another setback. Whether the second-quarter resilience survives the autumn will provide the first serious economic verdict on his premiership.
Sources
- Office for National Statistics: GDP first quarterly estimate, April to June 2026
- Office for National Statistics: monthly GDP estimate for June 2026
- Bank of England: July 2026 Monetary Policy Report
- British Chambers of Commerce: June 2026 economic forecast
- Reuters: UK economy gains from Gulf ceasefire, World Cup and sunshine
- Downing Street: cost-of-living measures