The UK economy grew by 0.4% in the second quarter of the year, down from 0.6% in the first three months, according to the Office for National Statistics (ONS). The slowdown comes as Treasury officials warned that growth could be as low as 0.3% in 2027 if disruption to the Strait of Hormuz linked to the Iran war continues until the end of 2026.
Services sector boosts growth
Defying expectations of no growth, the ONS said firms in the service sector reported boosts due to the hot weather and the start of the World Cup. Services also drove growth in June, with some businesses reporting that good weather and sporting events may have had a positive impact that month, according to Liz McKeown, ONS director of economic statistics.
Chancellor vows to double down
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.”
Iran war impact on economy
The conflict in the Middle East continues to impact the UK. Internal modelling from the Treasury, seen by the PM and Chancellor, suggests the UK economy could grow by just 0.9% this year if there is no permanent peace deal between the US-Israeli forces and Iran. Officials say they routinely plan for all possible scenarios, with the growth projection linked to a more extreme situation. The war has seen energy prices soar since February and raised further fears about the cost of living.
