UK economy expands 0.4% in Q2 as services offset stagnant production

• Economy grows 0.3% in June, beating expectations for contraction

The UK economy expanded 0.4% in the second quarter of 2026 as growth in services and construction offset stagnant production, official data showed Thursday.

The April-June increase followed growth of 0.6% in the first quarter and matched market expectations, according to the Office for National Statistics (ONS).

The economy grew 1.2% compared with the same quarter last year, exceeding expectations of a 1.1% expansion.

Services output increased 0.5%, led by gains in information and communication as well as professional, scientific and technical activities. Construction grew 0.3%, while production showed no growth.

Manufacturing output rose 1%, but this was offset by declines in electricity and gas supply and water and waste-management activities.

Household consumption increased 0.3%, while gross fixed capital formation rose 1.2% and business investment climbed 1.7%. Government consumption fell 0.3%.

GDP per capita grew 0.4% from the previous quarter and 1% year-on-year.

The ONS also reported that the economy expanded 0.3% in June, beating market expectations for a 0.1% contraction.

June’s growth followed no change in May, revised down from an earlier estimate of 0.1% growth, and a 0.1% contraction in April.

Although the data pointed to resilience in the first half of the year, the economic impact of the Iran war is expected to become more visible in the coming months as disruptions to energy shipments through the Strait of Hormuz feed into household and business costs.

British households are also facing a 13% increase in the energy price cap that took effect in July, adding to inflationary pressures and potentially complicating the Bank of England’s interest-rate outlook.