LONDON — The United Kingdom economy expanded 0.4 percent in the second quarter of 2026, according to figures released by the Office for National Statistics, capping a resilient first half that puts the UK atop the G7 growth table.
Monthly GDP rose 0.3 percent in June, exceeding economists' expectations for flat growth, offsetting zero growth in May to lift the quarterly figure.
Household spending drove much of the expansion. Warmer weather encouraged consumer activity, and the football World Cup boosted retail, hospitality and advertising revenues. Business investment also increased during the quarter.
Sanjay Raja, chief UK economist at Deutsche Bank, said the economy showed "no signs of stopping over spring." The 0.4 percent quarter-over-quarter expansion brought annualized first-half growth to 2 percent, Raja said, adding the UK would likely hold the top position in the G7 for a second straight quarter. He said a marginal upgrade to his 1.1 percent full-year GDP forecast is now likely.
The UK has historically posted stronger growth in the first half of the year, often followed by a softer second half — a pattern that suggests the current pace may not hold through year-end.
For the Bank of England, stronger growth reduces pressure for near-term rate cuts. A robust economy gives the Monetary Policy Committee less cover to ease, keeping the policy rate elevated and front-end gilt yields firm. Traders are pricing a higher-for-longer rate environment and pushing out the timing of any easing cycle.
Investors holding longer-dated gilts carry real duration risk here. If the MPC maintains its restrictive stance to contain inflation, bond prices face further depreciation — a direct hit to portfolios running extended duration.
UK outperformance relative to G7 peers also argues for spread compression against other major sovereigns. A stronger domestic growth outlook implies a lower risk premium for gilts versus peers carrying weaker growth trajectories.
On the corporate front, Entain — owner of Ladbrokes — reported a 5 percent increase in first-half revenues to £2.5 billion. Chief Executive Stella David said the company saw "strong momentum and volume growth continuing" alongside "strong player engagement across the group throughout the World Cup tournament." Intercontinental Hotels Group shares rose 1.8 percent following strong results earlier in the week, reflecting broader sector gains from increased consumer spending.
