Britain’s economic growth slowed in the second quarter of 2026, with GDP expanding just 0.4 percent between April and June, down from 0.6 percent in the first quarter, as soaring energy costs and political instability weighed on output.
The Office for National Statistics said services sector growth of 0.5 percent was the main driver, while construction also expanded and production flattened. The quarterly deceleration followed a strong start to the year, but economists warned that headwinds from the Middle East conflict and domestic political upheaval were likely to intensify.
June provided a bright spot with 0.3 percent monthly growth, recovering from flat output in May and a slight dip in April. The ONS noted that the recent football World Cup boosted turnover in June for businesses in wholesale, food and beverage serving, publishing, television production and advertising.
Political Turmoil and Energy Costs
The economic slowdown comes amid significant political upheaval. Prime Minister Keir Starmer resigned in late June and was replaced by Andy Burnham roughly a month later, as the Labour government fell behind Reform UK in opinion polls. New Finance Minister John Healey acknowledged the pressure on households, saying the government was putting British interests first and giving breathing space to those feeling the strain.
Millions of Britons have seen their cost of living worsen after the US-Iran war sent energy costs soaring. Iraq’s oil exports have recovered to 2 million barrels per day in August, their highest since the conflict began, but prices remain elevated across European markets.
I know people are worried about the impact of the conflict in the Middle East on their cost of living, which has been too high for too long and it has added pressure on British businesses.
Outlook clouded by Middle East conflict
The Bank of England has faced a difficult balancing act between supporting growth and containing inflation driven by energy prices. With the Iran war continuing to disrupt global oil supply chains and the Strait of Hormuz partially blocked, economists expect the cost pressures to persist through the second half of 2026.
The ONS described overall growth as having remained relatively robust despite the quarterly slowdown, but acknowledged that the Middle East conflict and elevated inflation presented ongoing risks to the outlook for British businesses and households.
Sources: Office for National Statistics; Naharnet; Asharq Al-Awsat; bne IntelliNews
discussion