LONDON: Britain's economy unexpectedly grew in June as companies enjoyed a respite from the energy price surge caused by the Iran war, the start of the men's soccer World Cup and hot weather, official data showed on Thursday.
Gross domestic product rose by 0.3% during the month, putting Britain on course for the strongest growth among the Group of Seven rich economies in the first half of 2026, after being flat in May.
"Overall, the economy seems to have weathered the Iran war extremely well, with little sign of consumers or businesses curtailing activity in response to higher oil prices," Thomas Pugh, chief economist at accountancy firm RSM UK, said. "Looking ahead, though, growth is likely to slow."
Economists polled by Reuters had forecast zero growth in month-on-month terms in June.
IRAN WAR RESPITE
The Office for National Statistics said fewer firms mentioned the Iran war than in previous months, coinciding with a period of ceasefire which has since lapsed.
It also said some alcoholic drinks producers, firms in the food sector, television production and advertising reported a boost from the World Cup, while retailers and some manufacturers mentioned the hot weather as a help.
The overall economic growth in June was driven by a 0.4% rise in services which was only partially offset by falls of 0.2% in industrial production and 0.1% in construction.
For the second quarter - covering the three months to the end of June - the economy grew by 0.4%, slowing from a rise of 0.6% in the first three months of the year, but still a stronger than usual pace of growth and matching economist expectations.
Andrew Hunter, senior economist at Moody’s Analytics, noted growth in household consumption and business investment.
"That said, it is worth remembering the repeated pattern in recent years of strong growth in the first half of the year being followed by a sharp slowdown in the second," he said.
Economists say the way the ONS measures the economy might be exaggerating growth in the first months of the calendar year.
The Bank of England, which has kept interest rates on hold despite the surge in energy prices, had forecast 0.3% economic growth in the second quarter but said underlying growth was running at about 0.1% and would slow to zero in the July-to-September period.
The second quarter covered a period of instability in British politics that eventually led to Keir Starmer resigning as prime minister in July.
His successor Andy Burnham has said his government will do what it can to lower costs for business against the backdrop of a "difficult financial outlook" and he has also pledged to address the cost of living for households.
As well as the revival of the Iran war which has pushed energy prices higher, speculation about possible tax increases in finance minister John Healey's first budget on October 28 could weigh on the economy, analysts say.
Trade data from the ONS showed fuel imports in June were their highest since December 2022, after adjusting for inflation. - Reuters
