Britain’s economy shows resilience despite Iran war shock

The UK economy grew by 0.4% in the second quarter of 2026, slowing from 0.6% in the previous quarter as disruption linked to the Iran war began to weigh on activity, official figures showed, The Guardian reports.

The Office for National Statistics (ONS) said GDP expanded by 0.4% in the three months to June, in line with economists’ expectations. Despite the slowdown, analysts said the figures showed the economy had proved more resilient than feared amid the ongoing conflict in the Middle East.

“Consumers have faced a series of shocks since the start of the year but have weathered them remarkably well,” said Yael Selfin, chief economist at KPMG.

However, she warned that momentum could weaken in the second half of the year. “The UK economy closed out the first half of the year on strong footing, but momentum is likely to fade over the coming months,” she said.

Services output rose 0.5% during the quarter, while construction grew 0.3%. Industrial production, including manufacturing and energy, was flat. Information and communication businesses recorded the strongest services growth, rising 2.7%, driven by computer programming.

GDP increased 0.3% in June alone, beating forecasts for no growth. Sanjay Raja, chief UK economist at Deutsche Bank, said warmer weather and World Cup-related spending may have supported demand.

“In short, households spent more than anticipated,” he said. “Hotter weather saw consumers ramp up spending. The World Cup may have also had an effect in keeping June GDP on an upward trajectory with retail, hospitality, and advertising revenues all up on the month.”

However, higher energy costs are expected to weigh on growth. Utility bills rose 13% in July after being protected by the energy price cap, while inflation is expected to accelerate from June’s 2.6%.

British Chambers of Commerce research manager Stuart Morrison warned of “a cocktail of cost pressures choking long-term business growth.”

Chancellor John Healey said: “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.”

By Vafa Guliyeva