London: The UK economy expanded by 0.4% in the second quarter of 2026, driven by growth in services and construction sectors, as revealed by official data released on Thursday. This growth helped offset stagnant production figures, providing a more optimistic outlook than previously anticipated.

According to Anadolu Agency, the 0.4% increase from April to June aligns with market expectations and follows the 0.6% growth experienced in the first quarter. The annual growth rate reached 1.2%, surpassing predictions of a 1.1% expansion. The services sector saw a 0.5% increase, propelled by gains within the information, communication, and professional, scientific, and technical activities. The construction sector also contributed with a growth of 0.3%, while the production sector remained flat.

Manufacturing output increased by 1%, though it was offset by reductions in electricity and gas supply, as well as water and waste-management activities. Household consumption rose by 0.3%, with gross fixed capital formation increasing by 1.2% and business investment climbing by 1.7%. Conversely, government consumption saw a decrease of 0.3%.

The GDP per capita experienced a growth of 0.4% compared to the previous quarter and a 1% increase on a year-on-year basis. Additionally, the Office for National Statistics (ONS) reported a 0.3% economic growth in June, defying market expectations of a 0.1% contraction. This follows a revised estimate of no growth in May, initially recorded as a 0.1% increase, and a 0.1% contraction in April.

Despite the positive data indicating resilience in the first half of the year, the ongoing Iran war may impact the economy in the coming months. Disruptions to energy shipments through the Strait of Hormuz could lead to increased household and business costs. Furthermore, British households are contending with a 13% rise in the energy price cap, effective from July, which adds to inflationary pressures and may complicate the Bank of England's interest rate decisions.