UK economy grows 0.4% in Q2 amid cooling labour market

The United Kingdom's economy showed mixed results in the second quarter of 2026. GDP grew by 0.4%, a slowdown from the 0.6% expansion seen in the first quarter, though the UK remains the fastest-growing economy in the G7 for the first half of the year. Growth was driven largely by the services sector, which expanded by 0.5%, and a 2.7% increase in information and communication.

Simultaneously, the labour market is losing momentum. The unemployment rate held steady at 4.9%, missing economist expectations for a decrease to 4.8%. Private sector regular earnings grew by only 2.8% annually, marking the weakest growth since late 2020. Additionally, job vacancies fell to 707,000, the lowest level since the pandemic and the lowest excluding pandemic figures since 2014.

These cooling trends in wages and employment may influence the Bank of England's decisions regarding interest rates. While the economy has shown resilience, analysts warn that rising energy costs and ongoing geopolitical uncertainty could impact future growth and consumer spending.