The UK economy demonstrated unexpected resilience in the first half of 2026, maintaining its position as the fastest-growing economy in the G7. This comes despite an earlier warning from the International Monetary Fund (IMF) that Britain would face the most significant economic impact from the Iran war among advanced nations.
Official figures from the Office for National Statistics show Gross Domestic Product (GDP) growth slowed to 0.4% in the three months to June, following a 0.6% growth rate in the first quarter. Monthly figures for June also exceeded expectations, showing 0.3% growth.
Consumer spending saw a 0.3% increase, partly attributed to hotter weather and the England men's football team reaching the World Cup semi-final. Business investment also jumped by 1.7%, with analysts suggesting the build-out of computing power for artificial intelligence played a role.
As a result, some forecasters are revisiting their predictions, with Deutsche Bank estimating an annual growth figure of 1.1%, surpassing the IMF's spring forecast of 0.8%. These figures provide positive news for Chancellor John Healey ahead of his first budget on 28 October.
However, concerns remain that this resilience may not be sustained. While consumers were insulated from rising household gas and electricity bills during the summer, the Ofgem energy price cap increased by 13% from the start of July. Experts warn this could push millions of households into fuel poverty, despite measures like VAT cuts on electricity bills from October.