UK economy grows 0.4% in Q2 as services drive expansion

The UK economy grew by 0.4% in the second quarter of 2026, with a stronger-than-expected performance in June helping maintain momentum despite a slowdown from the start of the year, according to the latest figures from the Office for National Statistics (ONS).

Real gross domestic product (GDP) increased by 0.4% in the three months to June compared with the three months to March, marking the seventh consecutive period of three-month-on-three-month growth.

Growth nevertheless moderated from earlier in the year. GDP had increased by 0.6% in the three months to May, revised down from an earlier estimate of 0.7%, and by 0.8% in the three months to April.

Services remained the principal driver of growth, increasing by 0.5% during the three months to June. Construction output rose by 0.3%, while production was flat over the period.

The quarterly figures were supported by a stronger end to the period, with GDP expanding by 0.3% in June. This followed no growth in May – revised down from an earlier estimate of 0.1% – and a 0.1% contraction in April.

June’s expansion was driven by the services sector, where output increased by 0.4%. This was partially offset by a 0.2% decline in production and a 0.1% fall in construction.

The figures underline the resilience of the UK economy but also point to a moderation in the pace of expansion as businesses continue to contend with elevated operating costs and wider economic and geopolitical uncertainty.

Mike Randall, CEO at Simply Asset Finance, warned that maintaining momentum would require policymakers to address the barriers facing SMEs.

“Slower growth shows the economy is still moving, but unless we tackle what is holding businesses back, it could quickly stall.

“For the new Prime Minister, this is an early test. SMEs want to invest and grow, but they need the government to see them as part of the solution, rather than just an expense.

“As we head into the third quarter, ‘growth in every postcode’ needs to stop being a party slogan, and actually translate into removing the barriers that stop good businesses getting on with the job.”

Neil Rudge, Chief Banking Officer at Shawbrook, said the latest figures demonstrated the continued resilience of UK businesses despite a challenging operating environment.

“The UK economy continues to demonstrate resilience, with monthly GDP rising by 0.3%. Businesses have had to grapple with a difficult economic backdrop alongside extreme weather and persistent heatwaves impacting day-to-day operations across several sectors, making this increase even more notable.

“While economic momentum in the second half of the year will depend heavily on geopolitical developments, SMEs will also be watching closely ahead of Chancellor John Healey’s first Budget. Early policy steps around skills shortages and youth unemployment are encouraging, but businesses will be looking for direct relief, whether through tax concessions or improved access to funding – to manage high operating costs.

“Regardless, SMEs will benefit from speaking with a broker about their financing options. Building and maintaining a suitable cash reserve remains one of the best ways to protect cash flow and cover unexpected costs, while waiting for more economic stability.”