The UK economy grew faster than expected in the first half of 2026, retaining its position as the G7’s fastest-growing economy despite the Iran war, higher energy prices and domestic political uncertainty. Consumer spending and business investment have remained comparatively strong, offering encouragement to Chancellor John Healey before his first budget, but the article argues that this resilience may be temporary.

GDP rose by 0.4% in the three months to June after 0.6% growth in the first quarter, while June alone recorded 0.3% growth against expectations of no growth. Warm weather, England’s World Cup run, and a 1.7% rise in business investment—partly linked to AI-related IT spending—helped, and Deutsche Bank now forecasts 1.1% annual growth versus the IMF’s 0.8% estimate. However, a 13% July increase in the energy price cap, persistent inflation and continuing Middle East tensions could weaken household spending and investment in the autumn.