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:
“Still on a post-speech high, the upgraded figure is yet more good news for the UK’s still-new(ish) prime minister.
The highest growth in the G7 for the first half is certainly a headline and one that will help keep nervous MPs in line for a while, plus it helps take off pressure for a new election - why risk it now when things appear to be improving nicely.”
Ashley Webb, senior UK economist at Capital Economics, warns though that growth may slow towards the end of this year:
The upward revision to real GDP growth in Q2, from 0.4% q/q to 0.5% q/q, suggests that the economy has been a bit more resilient to higher energy prices in the first half of the year than previously thought. This resilience may continue into Q3, but we still expect it to fade in Q4 as higher inflation takes a bigger bite out of households’ real incomes.
The 0.5% q/q gain in Q2 real GDP followed unrevised growth of 0.6% q/q in Q1, with the breakdown still showing that the economy is no longer being heavily supported by government spending, which contracted by 0.5% q/q (revised down from -0.3%).
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, agrees that growth will slow over the winter:
“The upward revisions to Q2 GDP growth means the economy was even stronger in the first half of the year than we previously expected, despite the Iran war. What’s more, the composition of growth looks a little healthier. Surveys suggest that much of that positive momentum has been carried forward into Q3 meaning we have revised up our annual GDP forecast to 1.4%.
“However, the next six months looks tougher with potential interest rate rises, a sharp increase in inflation and another tax raising budget all to come. That will drag heavily on growth 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:
“Greggs served up a tasty trading update, with total sales growth accelerating to 7.7% over the third quarter.
This was driven by more settled weather in recent months, alongside ongoing menu development and product innovation. New store openings also played their part, with the group on track for 100-110 net openings this year, excluding 12 Express locations, making it easier for more customers to tuck into their freshly baked goods.
Alongside cost inflation remaining at a manageable level of around 2%, the full-year outlook has modestly improved from prior guidance, which had pointed to operating profits of around £188mn.
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:
We believe such changes, whilst difficult, are necessary to ensure Greggs continues to meet capacity requirements for growth in the years ahead in the most cost-efficient manner. Our immediate priority is to minimise the impact on our people where possible. We will enter into a consultation period shortly to work with trade unions and employee representatives of those affected to refine and develop these proposals.
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.
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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:
“Consumer spending growth remained at the previous estimate of 0.3%, but business investment growth was revised up to 1.8%. That offers at least some evidence that the UK may be starting to catch the AI-driven investment wave very visible in the US.”
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:
“Today’s figures include our annual improvements to the measurement of the economy, incorporating new information that provides a better picture of activity across the UK’s service sector, alongside the usual inclusion of updated and improved data sources.
“Growth for 2025 as a whole was a little lower than previously estimated, with the profile of growth across the quarters also revised.
“However, stronger services growth in the latest quarter means the economy is now slightly larger than previously estimated.”
The agenda
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7am BST: UK national accounts for April-June 2026
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7.45am BST: French inflation report for September
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10:30am BST: BoE Financial Policy Committee minutes
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1.30pm BST: US PCE inflation index for August
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