UK economy grows 0.6% and 0.5% in first two quarters of 2026

Official ONS figures confirm consecutive quarters of real GDP growth, but the Bank of England warns that Middle East tensions are pushing energy prices higher and could lift inflation to around 3.2% by the end of the year.

The UK economy expanded by 0.6 per cent in the first quarter of 2026 and by 0.5 per cent in the second, according to the Office for National Statistics — the latter figure revised upward from an initial estimate of 0.4 per cent. Both quarters of positive growth come against a backdrop of mounting pressure on consumer prices, with CPI inflation already sitting at 2.6 per cent in June 2026, above the Bank of England’s 2 per cent target.

The Bank of England has identified higher global energy prices linked to the Middle East conflict as a key driver feeding through into UK consumer prices. Its July 2026 Monetary Policy Report projected that CPI inflation could reach around 3.2 per cent in the fourth quarter of 2026 as those energy costs pass through to households and businesses.

The Confederation of British Industry framed the back-to-back growth figures as evidence of resilience, but warned that Middle East tensions and inflation risks could weaken the outlook. The CBI’s July Economic Deep Dive, which carries the detailed analysis, is restricted to members and could not be independently reviewed from publicly available information.

The Office for Budget Responsibility added a further complication: its central inflation forecast was finalised before the Middle East conflict escalated, so it does not yet incorporate the more recent developments that the Bank of England has since flagged.

So the headline numbers are solid. But the Bank of England projected weaker underlying GDP growth in coming quarters as subdued momentum persisted — and with inflation running above target and energy markets unsettled, the figures show that the picture for the second half of 2026 is considerably less straightforward than the first half suggested.