UK Economy Grows 0.4 Percent in Second Quarter Despite Iran War Energy Shock

LONDON — The United Kingdom's gross domestic product expanded by 0.4 percent in the three months to June, according to figures released by the Office for National Statistics, slowing from 0.6 percent growth in the first quarter.

The deceleration aligns with economists' expectations and is attributed to disruptions from the ongoing Iran war. Rising energy costs, which escalated after U.S. strikes on Iran, began to weigh on the British economy during the period, though analysts said the economy held up better than feared.

Consumers maintained spending levels despite a succession of economic shocks since January.

Service sector output rose by 0.5 percent across the second quarter, leading economic activity. Construction expanded by 0.3 percent, while industrial production — which includes manufacturing and energy — remained flat.

Within services, information and communication businesses posted the strongest growth, up 2.7 percent, driven largely by computer programming activity.

Monthly GDP for June rose 0.3 percent when economists had forecast no growth. Sanjay Raja, chief UK economist at Deutsche Bank, attributed the strength to increased household spending. Warmer weather encouraged consumer activity, Raja said, and World Cup-related expenditure added to June's gains. Retail, hospitality and advertising revenues all rose during the month.

Energy costs surged after President Donald Trump ordered strikes on Iran in late February, pushing up oil and gas prices. Consumer utility bills were shielded from those increases until July by an energy price cap, which then jumped 13 percent, hitting households directly. Economists forecast continued high energy costs will weigh on growth through the rest of 2026.

Chancellor John Healey is preparing to present his first budget on Oct. 28, facing pressure to offer additional support to households and businesses this winter. Last month, Andy Burnham announced a VAT cut for electricity bills, telling the BBC he would like to implement further measures.

Stuart Morrison, a research manager at the British Chambers of Commerce, said the headline GDP figures should not obscure the range of cost pressures hindering long-term business growth.

The Office for National Statistics is scheduled to publish July inflation figures in the coming weeks, offering further insight into price pressures across the economy.

Consumers maintained spending levels despite a succession of economic shocks since January.

Within services, information and communication businesses posted the strongest growth, up 2.7 percent, driven largely by computer programming activity.

Stuart Morrison, a research manager at the British Chambers of Commerce, said the headline GDP figures should not obscure the range of cost pressures hindering long-term business growth.

The Office for National Statistics is scheduled to publish July inflation figures in the coming weeks, offering further insight into price pressures across the economy.