The UK economy appears set to achieve another quarter of growth as businesses adapt to the ongoing impacts of the Iran conflict. Economists are forecasting a GDP increase of 0.4% for the second quarter of 2026, reflecting resilience despite persistent supply chain disruptions and inflationary pressures.
Resilience in the Face of Adversity
According to projections from the Office for National Statistics, the UK economy is demonstrating notable stability as it navigates the effects of geopolitical tensions and political uncertainty. After a solid 0.6% growth in the first quarter, a further 0.4% rise in GDP would indicate sustained economic momentum.
Rob Wood, chief UK economist at Pantheon Macroeconomics, emphasised that the overarching narrative is one of resilience. “The big picture is that the economy has remained resilient to the hit from the war in Iran,” he stated, highlighting the adaptability of UK businesses.
Sectoral Strengths and Weaknesses
The services sector, which dominates the UK economy, showed signs of robust performance in May, driven largely by professional and scientific services. However, recent reports suggest that manufacturing firms have begun stockpiling in anticipation of supply shortages, which has contributed to the overall growth figures.
Despite this, the month of June painted a more complex picture. Economists have noted that the heatwave has produced mixed outcomes for various industries, putting additional strain on sectors like construction. Wood predicts a slight contraction in monthly GDP of 0.1% for June, reversing May’s gains due to reduced construction activity and stagnation in both services and industrial production.
Anticipated Boost from World Cup Fever
The onset of the FIFA World Cup in June is expected to influence consumer behaviour, albeit in unexpected ways. Thomas Pugh, chief economist for RSM UK, noted that while the event typically boosts hospitality spending, current trends indicate a shift in consumer preferences. “Our surveys suggest consumers are likely switching away from restaurants towards pubs to watch the World Cup, rather than increasing overall spending,” he remarked.
Nonetheless, Pugh offers a glimmer of optimism, forecasting a potential 0.1% increase in GDP for June, aided by a surge in mining activity. He anticipates that this could collectively support a 0.4% growth rate for the second quarter, fueled by strong momentum from the previous quarter alongside consumer resilience in the face of inflation.
Government’s Growth Agenda
For Prime Minister Andy Burnham, a quarterly GDP increase would be a significant boost as he strives to deliver growth across the entire UK. Recently inaugurated in Manchester, where he is establishing a new governmental hub named No 10 North, Burnham aims to decentralise power away from Westminster and foster economic development in diverse regions.
Why it Matters
The expected growth in the UK economy amidst global challenges underscores the adaptability of businesses and the potential for recovery even in turbulent times. As the government seeks to stimulate growth across all areas, the resilience showcased in recent economic data is crucial. It not only reflects the current state but also sets the stage for future policy decisions aimed at sustaining economic vitality in the face of ongoing uncertainties.
