UK Economy Slows in Second Quarter Amid Political Turmoil and War Fallout

Britain's economy experienced a slowdown in the second quarter, with gross domestic product increasing by 0.4 percent. This follows a more robust expansion of 0.6 percent in the first quarter, according to the Office for National Statistics (ONS). The national statistics office reported that output remained relatively strong despite domestic political unrest and the economic fallout from the US-Iran war, which has driven up energy costs.

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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.

The political landscape saw significant shifts, with Keir Starmer resigning as prime minister in late June. He was succeeded approximately one month later by Andy Burnham, as the Labour government faced challenges in opinion polls against the hard-right party Reform UK. In response to the latest economic data, the new finance minister, John Healey, stated that the Labour government under Burnham is actively working to prioritize British interests. He emphasized efforts to provide relief to those under financial strain, enhance national resilience, and restore hope.

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Growth (overall) slowed in the second quarter of the year, following a strong start to 2026, but remained relatively robust.

Millions of Britons have faced worsening financial situations, exacerbated by high inflation and soaring energy prices linked to the Middle East conflict. "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," Healey acknowledged.

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Services were once again the main driver of growth.

Despite the overall slowdown, the services sector continued to be the primary engine of growth, expanding by 0.5 percent in the second quarter. Construction also saw growth, while industrial production remained flat. The ONS noted that June experienced a strong finish, with 0.3 percent growth, partly attributed to the football World Cup boosting turnover for businesses in sectors like wholesale, food and beverage services, publishing, and television production. However, business groups cautioned that the headline figures mask underlying cost pressures hindering long-term growth, urging the government to implement measures that stimulate trade, investment, and productivity.

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the headline figures shouldn't disguise the cocktail of cost pressures choking long-term business growth.