United Kingdom: Softer second-half growth expected – Societe Generale

Societe Generale’s Sam Cartwright notes United Kingdom (UK) Gross Domestic Product (GDP) rose 0.4% qoq in 2Q26, driven mainly by business investment and resilient consumer spending. ICT equipment investment, likely linked to AI, has been a key growth driver since 4Q24 and is expected to support GDP near term. However, Cartwright anticipates softer GDP growth of 0.1% qoq in 2H26 as temporary supports fade and energy-related headwinds intensify.

Growth seen slowing in 2H26

"Since 4Q24, ICT equipment investment has added 0.45pp to GDP, against a total increase in GDP of 1.9%, and is likely to continue supporting growth in the near term if AI-related investment remains strong."

"Over the past few years, strong growth in the first half has typically been followed by weaker growth in the second half. With the US-Iran conflict still unresolved, some of the one-off factors that supported 2Q26 GDP, such as the World Cup and favourable weather, likely to fade, speculation over Autumn Budget tax rises potentially encouraging firms to adopt a wait-and-see approach, monetary policy remaining restrictive, and utility price increases set to weigh on real incomes, we expect this pattern to repeat and continue to forecast soft growth in 2H26."

"Overall, we forecast GDP growth to average 0.1% qoq in 2H26, matching the BoE's July MPR forecast, leaving 2026 growth at 1.1%. Even so, this is well above our 2026 forecast of 0.7% at the end of 2025."

"The key risk remains the trajectory of the US-Iran conflict. However, so far, UK activity data has proved resilient to the crisis."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)