“This was economic resilience with an asterisk as much of the second quarter's strength was driven by temporary factors, including Iran war-driven stockpiling by businesses, unusually warm weather and the World Cup, rather than genuine momentum.
“While stronger consumer spending and business investment imply that households and firms largely shrugged off the shockwaves from the Iran war, the growing financial squeeze sparked by the conflict means this upturn will be difficult to sustain.
“This slight second-quarter slowdown is likely to be followed by a more painful deceleration in Q3, as the squeeze on household incomes from higher inflation and energy costs increasingly stifle growth, particularly if pre-Budget speculation further dampens confidence.
“Expected weaker GDP growth in the second half of the year could make the Chancellor's Budget balancing act more challenging by increasing fiscal pressures and limiting his policy options at a time of heightened financial market volatility.
“Though these figures won’t knock rate-setters off their current hawkish positioning, the chances of a September rate hike remain slim, given expectations that softer economic activity in the months ahead will ultimately help contain inflation.”
ENDS
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* includes parent companies. Source: ICAEW member data March 2026, Interbrand, Best Global Brands 2025.
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