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UK GDP growth slows as Iran war lifts energy prices
Second-quarter GDP rose 0.4% and services grew 0.5%, but analysts warned momentum is likely to fade in the second half as higher energy costs weigh on confidence.
The UK economy grew more slowly in the second quarter, with economic activity slowing as disruptions linked to the Iran war began to hit demand and costs, according to official data cited by the Guardian Economics. The Office for National Statistics said GDP expanded by 0.4% in the three months to June, down from 0.6% in the prior quarter, matching City economists’ expectations.
The breakdown showed services output rising 0.5% over the quarter and construction up 0.3%, while industrial production, which includes manufacturing and energy, was flat. Within services, information and communication businesses were the strongest, growing 2.7% led by computer programming.
Energy prices rose after Donald Trump’s attacks on Iran at the end of February, adding pressure through business costs even as consumer utility bills were protected until July by the energy price cap. In addition, the data showed June alone was positive, with GDP up 0.3% month on month versus forecasts for no growth.
The results come as the UK’s new chancellor, John Healey, prepares his first budget on October 28, while there is also concern about a weaker second half. British Chambers of Commerce research manager Stuart Morrison said the figures should not hide ongoing cost pressures, and with July inflation expected to be higher than June’s 2.6%, sustained inflation could increase pressure on the Bank of England to raise interest rates.