LONDON — The United Kingdom’s economy has demonstrated considerable resilience throughout 2026 despite facing pressure from energy market volatility linked to the conflict involving Iran. Deutsche Bank believes UK economic growth could outperform its previous forecasts.
Deutsche Bank Research, led by Sanjay Raja and Maui Brennan, reported that the UK’s gross domestic product (GDP) grew by 0.6% quarter-on-quarter in the first quarter of 2026, followed by further growth of 0.4% in the second quarter.
With this performance, the UK has emerged as one of the fastest-growing G7 economies so far this year. On an annual basis, the UK economy is growing at around 2%.
UK Economic Growth Exceeds Expectations
The UK economy’s performance during the first two quarters of 2026 was stronger than many economists had anticipated. The figures suggest that the economy has remained relatively resilient in the face of external pressures, including heightened energy risks.
Deutsche Bank said several factors have supported economic growth, including more contained inflation, resilient household consumption, business investment and an increase in inventories.
Household spending rose by approximately 0.85% during the first half of 2026, further supporting domestic economic activity.
Economic Activity Begins to Strengthen
Recent economic indicators have also provided positive signals. The preliminary composite Purchasing Managers’ Index (PMI) rose to 52.5 in early August, up from 52.2 previously.
The increase suggests that business activity continues to strengthen, potentially providing further support for economic growth during the second half of 2026.
Deutsche Bank sees scope for stronger growth in the third quarter of 2026. The carry-over effect from previous growth and continued economic momentum could push GDP growth above the bank’s earlier projection.
Growth Forecast Could Be Revised Higher
Deutsche Bank had previously forecast that the UK economy would grow by around 1.1% throughout 2026. However, recent developments have shifted the risks surrounding that forecast towards the upside.
The bank currently expects GDP growth of around 0.1% quarter-on-quarter in both the third and fourth quarters of 2026. Nevertheless, stronger-than-expected economic performance could create room for an upward revision to its full-year forecast.
Despite these positive developments, the UK economic outlook continues to face several risks, particularly global uncertainty and movements in energy prices.
Overall, Deutsche Bank believes the UK economy continues to demonstrate considerable resilience. If economic momentum and domestic consumption remain sustained, UK economic growth in 2026 could exceed the initial forecast of 1.1%.(*)
