Introduction: UK economy bigger than first thought after GDP revised higher
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK economy grew faster than first estimated in the second quarter of the year, despite the disruption caused by the Iran war.
UK growth in April-June has been revised to 0.5%, up from the previous estimate of 0.4%, in the latest National Accounts.
That’s a welcome piece of good news for chancellor John Healey, as he draws up the budget due in four weeks’ time, and means his predecessor Rachel Reeves handed over a slightly larger economy than previously recognised.
Growth in Q2 2026 was driven by the services sector (where activity increased by 0.6%) and the construction sector (which grew by 0.8%), while the production sector shrank by 0.1%.
However…the Office for National Statistics, which publishes the data, has also revised down its estimate for growth in 2025.
ONS director of economic statistics Liz McKeown said:
The agenda
7am BST: UK national accounts for April-June 2026
7.45am BST: French inflation report for September
10:30am BST: BoE Financial Policy Committee minutes
1.30pm BST: US PCE inflation index for August
Over in France, inflation has jumped this month.
Statistics body INSEE has estimated that the Consumer Price Index (CPI) should rise by 3.0% year-on-year in September, up from a 2.4% rise in August.
INSEE predicts that energy prices accelerated again, driven by those of petroleum products and gas.
Services inflation probably increased slightly thos month, while food prices are forecast to have accelerated, especially for fresh products.
On an EU-harmonised basis, French inflation jumped to 3.4% this month, the fastest pace in more than two years.
In another boost for the UK economy, Allianz Trade has upgraded its growth forecast for this year by 0.3 percentage points to 1.3%.
In its latest Global Economic Outlook report, the international insurance company explains that the UK economy has performed better than expected in 2026.
Allianz Trade says:
UK business insolvencies have fallen 5%, bucking a 6% global rise and increases of 19% in the US, 7% in Germany and Japan, and 5% in France.
Consumer spending and business investment have remained resilient, while manufacturing has rebounded and aerospace continues to power ahead.
Households have sustained spending by reducing their savings rate, raising questions over how long that resilience can last.
UK inflation is forecast to reach 3.4% in Q4 2026, as higher utility bills and input costs feed through to consumer prices.
The Bank of England is expected to raise rates twice before year-end, taking Bank Rate from 3.75% to 4.25%.
Rate cuts are not expected to begin until November 2027, with higher borrowing costs set to weigh on investment, housing and growth.
Zoopla: House sales down 9% in September
Higher borrowing costs hurt demand for homes in September, the property portal Zoopla has reported this morning.
Zoopla found that the number of sales being agreed this month fell by 9% compared with September 2025.
The drop in sales came despite the number of homes on the market rising by 5% year on year, with the gap between supply and demand most acute in London and southern England.
Annual house price growth has also slowed to 0.8%, the lowest level since July 2024, according to the latest Zoopla House Price Index. The average price of a UK home is now £273,000, it said.
GDP upgrade is 'boost to Burnham' but winter slowdown looms
This morning’s upgrade to UK growth in April-June is a boost to Andy Burnham, analysts say, even though he didn’t take office until almost a month later.
Chris Beauchamp, chief market analyst at IG, says:
Ashley Webb, senior UK economist at Capital Economics, warns though that growth may slow towards the end of this year:
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, agrees that growth will slow over the winter:
Greggs shares jump
Shares in Greggs have jumped by 7.5% at the start of trading after it announced a pick-up in sales, and plans to cut 740 jobs.
Investors are cheered that Greggs now expects “a modestly improved outcome for 2026”.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, says:
Encouragingly, the UK’s exports in April-June were much stronger than first estimated.
Today’s national accounts show that export volumes increased by 2.8% in the quarter, revised up from the first estimate of a 0.5% rise.
UK cements position as fastest-growing G7 country this year
This morning’s growth upgrade underlines the UK’s status as the fastest-growing G7 economy in the first half of 2026.
Growth of 0.6% in Q1, and 0.5% in Q2, put the UK ahead of other advanced economies this year – although on an annual basis Britain shares third place with Japan:
Greggs proposes 740 job cuts
UK bakery chain Greggs has announced plans to cut more than 700 jobs, despite a pick-up in sales.
Greggs is proposing closing four of its production sites, which could lead to up to 740 roles becoming redundant.
Greggs warns that with signs of greater inflationary pressures in 2027, it needs to cut costs to remain competitive.
It says:
The proposals could cost £60m, but then save £20m a year.
Greggs also reported 7.7% sales growth in the third quarter of the year, which it attributes to “continued menu innovation” and more settled weather. Those menu changes includes its new Steak & Stilton Bake, and relauched salads.
Energy bills in Great Britain forecast to jump by £276 a year from January
Household energy bills in Great Britain are predicted to soar by £276 a year for the typical household from January as the impact of the Middle East war continues through the coldest months of winter.
The government’s cap on energy prices is poised to jump by 16% to the equivalent of £1,999 for the average annual dual-fuel bill in a further blow to struggling households, according to figures from the leading forecaster Cornwall Insight.
The increase for the January to March quarter is well above the consultancy’s previous prediction of a 9% rise, with analysts blaming the uptick on the recent rise in gas market prices to three-year highs.
It would take the cap to its highest level for four years.
UK business investment jumps as 'AI-driven wave' arrives
The AI boom may have driven UK business investment up in the April-June quarter.
The ONS reports that business investment is estimated to have increased by 1.8% in the quarter, and was 5.2% higher than a year ago.
Gross fixed capital formation (which measures the acquisition of fixed assets by businesses, governments, and households) rose by 0.9% in Q2; the main drivers of the growth are “increases in other buildings and structures”, which would include data centres.
Martin Beck, chief economist at WPI Strategy, says:
Britons also put more money aside for a rainy day in April-June.
The household saving ratio increased by 0.2 percentage points to 8.8% in Quarter 2 2026, driven by a rise in the contribution of non-pension saving, the ONS says.
UK living standards picked up in April-June
An important measure of living standards jumped in the second quarter of this year, today’s national accounts show.
Real household disposable income per head increased by 1.0% in April-June, following a decrease of 0.8% in January-March.
That means people had more money left to spend, save, or invest after taxes and deductions, adjusted for inflation.
Introduction: UK economy bigger than first thought after GDP revised higher
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK economy grew faster than first estimated in the second quarter of the year, despite the disruption caused by the Iran war.
UK growth in April-June has been revised to 0.5%, up from the previous estimate of 0.4%, in the latest National Accounts.
That’s a welcome piece of good news for chancellor John Healey, as he draws up the budget due in four weeks’ time, and means his predecessor Rachel Reeves handed over a slightly larger economy than previously recognised.
Growth in Q2 2026 was driven by the services sector (where activity increased by 0.6%) and the construction sector (which grew by 0.8%), while the production sector shrank by 0.1%.
However…the Office for National Statistics, which publishes the data, has also revised down its estimate for growth in 2025.
ONS director of economic statistics Liz McKeown said:
The agenda
7am BST: UK national accounts for April-June 2026
7.45am BST: French inflation report for September
10:30am BST: BoE Financial Policy Committee minutes
1.30pm BST: US PCE inflation index for August
