The UK economy grew by 0.4% in the second quarter of the year, a slowdown from the 0.6% growth in the first three months of the year, but evidence of continued resilience to geopolitical pressures.

Liz McKeown, director of economic statistics at the Office for National Statistics, said services were once again the main driver of growth, while production was broadly unchanged and construction also grew.

“Growth slowed in the second quarter of the year, following a strong start to 2026, but remained relatively robust,” she said.

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. 

“This is an active, hands-on government, putting British interests first – giving breathing space to those feeling the strain, making our country more resilient and bringing hope back. 

“We’ve seen the fastest growth in the G7 this year, but we now need to double down and drive growth in every postcode.”

Ben Jones, CBI senior lead economist, said: June’s stronger-than-expected growth is encouraging, with the warm weather and start of the World Cup supporting consumer spending.

“Together with a solid performance across the second quarter, today’s figures suggest the UK economy has so far proved more resilient to the economic fallout from the Iran war than was widely expected a few months ago. 

“The challenge now is maintaining that momentum. Businesses have become somewhat less pessimistic recently, but uncertainty around the new government and the Autumn Budget could encourage firms to keep plans on ice.

“Continued instability in the Middle East also leaves the economy exposed to renewed volatility in energy markets and financial conditions. 

“As the Prime Minister focuses on the cost of living this week, the priority must be to build on the economy’s recent resilience and deliver sustainable growth.

“Tackling the cost of doing business – from high industrial electricity and employment costs to business rates reform – will be critical to achieving this goal. 

“This would help put the economy on a stronger footing to deliver rising real wages and higher living standards across the country.”

Stuart Morrison, research manager at the British Chambers of Commerce said: “The headline figures shouldn’t disguise the cocktail of cost pressures choking long-term business growth. 

“This is not a new problem. Our analysis shows domestic policy-driven costs for a typical SME have risen by more than 70% over the past decade. 

“The Autumn Budget must be a game changer for stronger, sustainable growth. We need measures that boost trade, investment and productivity. In short, the Chancellor must back business, cut costs and deliver growth.”

Scottish margins are being squeezed as rapid growth in employment and wages clashes with weakening pricing power, writes John Glover.

According to the latest Royal Bank of Scotland Growth Tracker, Scotland was the only nation in the UK outside of Northern Ireland to record payroll growth in July with employment rising at its fastest rate since September 2024 – reaching a nearly two-year high. Full story here