Green shoots or another false dawn? Economy springs back

Britain tops the G7 – but don't crack open the champagne

Britain's economy has finally delivered some good news. Growth is up, we're leading the G7, shoppers are spending again and businesses are investing after years of gloom. But before anyone starts celebrating, there's a catch. Most small businesses are still struggling with soaring costs, energy bills are rising again and global tensions could yet snuff out this fragile recovery. The green shoots are there – the challenge now is stopping them from withering.

GREEN SHOOTS?

The latest GDP figures are out this morning: GDP has jumped again, Britain tops the G7, households spend big, and businesses invest.

It may not be time to party as energy bills and global conflict threaten to pour on cold water, and our crucial small and micro businesses aren’t yet feeling any of the love, but the UK’s economy has just delivered its strongest half‑year performance in recent memory, so cautious optimism may be the order of the day.

New ONS figures show the UK grew 0.4% in the second quarter of 2026, after a 0.6% surge in Q1. If the pace continues, GDP will rise 2% this year, a level of growth the UK hasn’t seen since the bounce after the pandemic. For the second quarter running, the UK also looks like taking top spot in the G7 growth league table.

After years of stagnation, shocks, inflation and political instability, the UK economy is, possibly, maybe, showing signs of life. The big question is what will it take to make it last?

Consumers spent

People were confident enough to spend. Hot weather and England’s World Cup run pumped money into:

• retail

• hospitality

• alcohol manufacturing

• food and drink venues

• advertising

• TV production

June GDP alone rose 0.3%, with businesses directly citing the World Cup as the reason for the higher turnover.

Even construction which has been battered by heatwaves, skills shortages and rising costs, particularly the housebuilding sector, still managed 0.3% growth.

Businesses invested

Despite the conflict in the Middle East making all the headlines on the state of the global economy, UK firms invested. ONS data show manufacturing held steady and services (which had been sluggish) grew by 0.5%. Warehousing, wholesale and travel agencies reported mixed but improving conditions and concerns about supply chain disruption fell from 38% in April to 31% in June

Real incomes

The UK economy is now 1.2% bigger than a year ago.

Real GDP per person, the measure that reflects living standards, rose 0.4% in Q2 and is up 1% year‑on‑year. It’s not a boom and people aren’t necessarily feeling it yet, but it’s movement in the right direction. We now need to continue in that direction.

Doubling down

These are the first GDP figures for the new chancellor, John Healey. He’s aware of the challenge: “We’ve seen the fastest growth in the G7 this year, but we now need to double down and drive growth in every postcode.”

The Middle East conflict is still adding pressure to households and businesses, and the risks are still real and probably still rising. Economists still think the second half of the year could be tougher.

Energy bills are set to rise: Dual‑fuel costs will hit households and businesses in Q3.

Pump prices are high and higher petrol and diesel costs squeeze disposable incomes.

Heatwaves disrupted productivity: schools closed, construction slowed, and manufacturing faced heat‑related shutdowns.

Global conflict remains unpredictable. The ONS says the exact impact is “difficult to quantify”, but businesses remain alert.

The UK’s pattern is familiar with a strong start and a weaker second half to the year being the pattern over the past few years.

Green shoots are appearing.

The UK economy is growing faster than expected and topping the G7. We’re seeing stronger consumer spending, benefiting from major events. That’s also attracting business investment and beginning to show in rising real incomes. However the recovery is fragile and uneven and the majority of small and micro businesses are struggling rather than investing. There’s a long way to go and energy costs, global conflict, heatwaves and squeezed disposable incomes could slow momentum in the months ahead. The Government needs to remember small and micro businesses are crucial to the UK economy and under enormous pressure, much of it policy inflicted. One way to keep the green shoots from shrivelling back is to boost small businesses support.

For now, Britain is enjoying a rare burst of economic sunshine. The challenge is keeping it alive when the weather, and the world, inevitably turns.