UK Economy's Honeymoon Over as Inflation and Labour Market Woes Loom

The UK's economy has shown resilience in recent quarters, but this trend is unlikely to last. According to ICAEW's Chief Economist Suren Thiru, rising inflation and a weakening labour market are major concerns.

In the second quarter of 2026, GDP grew by 0.4%, down from 0.6% in the previous quarter. However, this growth was largely driven by temporary factors such as stockpiling due to the Iran war and unusually warm weather. Monthly GDP is estimated to have grown by 0.3% in June, following no growth in May.

The construction sector increased by only 0.3%, while industrial production output showed no growth. Business investment is estimated to have increased by 1.7% in Q2 and is now estimated to be 0.8% higher than it was in the same quarter a year ago.