UK economy slows as political unrest, Mideast war bite

Britain's Prime Minister, Andy Burnham, speaks to the media after chairing a COBR meeting at Downing Street on the UK's ongoing response to extreme heat, wildfires and drought, in central London on August 12, 2026. [Credit: AFP]

Britain’s economy slowed in the second quarter, the national statistics office reported Thursday, saying that output remained “robust” despite domestic political unrest and fallout from the US-Iran war.

The Gross Domestic Product increased 0.4 per cent in the April-June period after it expanded 0.6 per cent in the first quarter, the Office for National Statistics said in a statement.

Keir Starmer resigned as the British Prime Minister in late June and was replaced around one month later by Andy Burnham, as the Labour government was overtaken in opinion polls by the hard-right party Reform UK.

Following Thursday’s data, the country’s new finance minister, John Healey, said that under Burnham, Labour was a “hands-on government, putting British interests first, giving breathing space to those feeling the strain, making our country more resilient and bringing hope back.”

Struggling already with elevated inflation, millions of Britons have seen their situation worsen after the US-Iran war sent energy costs soaring.

“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 added in a statement.

– World Cup boost –

The latest GDP data showed that output from the services sector grew 0.5 per cent in the second quarter, and construction also expanded while production flattened.

“Growth (overall) slowed in the second quarter of the year, following a strong start to 2026, but remained relatively robust,” said ONS Director of Economic Statistics, Liz McKeown.

“Services were once again the main driver of growth,” she added.

The second quarter had a strong finish, growing 0.3 per cent in June after zero expansion in May and a slight dip in April, the ONS said.

It cited the recent football World Cup “as a reason for an increase in turnover in June… by businesses in industries such as the manufacture of alcohol, wholesale, food and beverage serving activities, publishing activities, television production and advertising.”

But the research manager at the British Chambers of Commerce, Stuart Morrison, said in a statement that “the headline figures shouldn’t disguise the cocktail of cost pressures choking long-term business growth.”

He said Healey’s first budget, due October 28, “must be a game changer for stronger, sustainable growth,” adding that Britain needed “measures that boost trade, investment and productivity.”

Burnham has so far concentrated on easing the cost of living for households, with tax on their electricity bills set to be removed this winter.

The Bank of England recently warned that British inflation was set to rise as the Mideast war keeps energy prices high.