London Daily

Focus on the big picture.
Thursday, Jul 23, 2026

Economy shrinks - with Jubilee partly to blame

Economy shrinks - with Jubilee partly to blame

A big fall in economic growth in June was partly caused by the extra bank holiday to celebrate the Queen's Platinum Jubilee.

The UK's economy contracted by 0.1% in the second quarter, according to official estimates.

It follows a positive first quarter, in which the economy grew by 0.8%.

Last week, the Bank of England predicted that the UK will fall in to a recession by the autumn and could have more than a year of subsequent economic contraction.

Although there was some growth in April, May and June in service activities such as travel agencies as COVID-19 restrictions were lifted, the ending of the test and trace initiative dealt a blow to the economy.

"Health was the biggest reason the economy contracted as both the test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter," said Darren Morgan, director of economic statistics at the Office for National Statistics.

"These were partially offset by growth in hotels, bars, hairdressers and outdoor events across the quarter, partly as a result of people celebrating the Platinum Jubilee."

There was a large fall in June of 0.6%, partly caused by the significant reduction in services spending as coronavirus test and trace was phased out, and partly because the Platinum Jubilee meant that there were two fewer working days that month.

The UK's economic performance was worse in the second quarter than that of countries such as Canada, Italy, France, and Germany, with underlying data showing that economic pressures were beginning to take hold on consumer spending.

Private consumption fell by 0.2% in the second quarter - an indication that record high prices for some products were stopping people from spending.

But it is too soon to say that the UK is in a recession, according to KPMG.

"It is too early to call a recession despite output fall," Yael Selfin, chief economist at KPMG UK, said.

"Households are already bruised by rising inflation, which is putting a squeeze on real incomes, while rising interest rates are making servicing mortgages less affordable," Ms Selfin said.

Nadhim Zahawi, the chancellor, told Sky News that he rejected the idea that the government had been asleep at the wheel throughout this crisis, and blamed Russian president Vladimir Putin for record energy prices.

"I don't recognise that," he said, pointing to an existing package of support which includes a £400 energy bill discount for all households.

But Mr Zahawi refused to say that more direct help for struggling families would be inevitable this winter.

"We're looking at all the options of what additional help we can deliver for families," he said.

On the subject of taxing the profits of energy companies, Mr Zahawi said: "There are no easy answers to this...every decision is a tough decision."

The latest data comes after dire forecasts from the Bank of England of a 15-month recession - five consecutive quarters of economic contraction.

Speaking after the Bank hiked interest rates by 50 basis points (0.5%) this month in an attempt to deal with the highest rate of inflation in more than 40 years, Governor Andrew Bailey said GDP would probably fall to 1.25% in 2023 and 0.25% in 2024.

If this forecast is borne out, it would be the first instance of two years of annual economic contraction since the 1960s.

But Ms Selfin said that KPMG was not as pessimistic as the central bank.

"We expect a slightly shorter and milder recession than the Bank of England pencilled in last week," she said.

"The main difference stems from our view that energy prices will eventually subside, contributing less to inflation, while the Bank's forecast means that prices stay elevated over the next three years."

People are facing massive rises in energy bills, with consultancy Cornwall Insight predicting that the price cap is expected to reach about £3,582 a year for the average household from October.

This is an increase from the £3,359 predicted earlier this month, and compares to the price cap last October of £1,277.

Newsletter

Related Articles

0:00
0:00
Close
Northern Ireland Secures Additional Infrastructure Funding From UK Treasury
Wales Approves Port Investment Plans to Support Green Energy Supply Chains
UK Financial Regulator Simplifies Stock Market Rules to Attract More Listings
UK Reports Decline in Small Boat Crossings Across the English Channel
UK Government Creates Emergency Support Fund for Financially Pressured Universities
Scottish Government Launches Economic Strategy Focused on Innovation and Renewable Industries
UK Expands Sustainable Farming Incentives to Support Environmental Measures
UK Government Introduces New Neighbourhood Policing Standards Across England and Wales
UK Competition Regulator Opens Review of Artificial Intelligence Foundation Models
UK Deepens Indo-Pacific Security Cooperation After Talks With Singapore and Japan
UK Announces Rail Modernisation Plan for Northern England With New Infrastructure Funding
UK Government Updates Housing Planning Rules to Accelerate Residential Construction
UK Approves Major North Sea Offshore Wind Project to Support Clean Power Goals
UK Health Service Begins Major Digital Upgrade to Cut Hospital Waiting Times
Bank of England Holds Interest Rates Steady as UK Inflation Pressures Remain Persistent
UK Universities and Industry Expand Space and Defense Research Partnerships
House of Lords Approves Social Housing Bill Amendments on Shared Ownership Rights
House of Lords Advances Civil Aviation Bill With New Passenger Protection Measures
UK Government Suspends Tariffs on Fertilizer and Food Imports to Reduce Costs
Russell Group Universities Support New UK Business Department Focused on Innovation
UK Parliament Opens Inquiry Into Transport Barriers Facing Young Jobseekers
Home Builders Federation Calls for Lower Costs as New UK Government Sets Housing Priorities
Andy Burnham Meets UK Devolved Leaders to Strengthen Regional Cooperation
Andy Burnham Holds First International Calls With Trump, Macron, and Zelenskyy
Andy Burnham Reshuffles Cabinet With John Healey Appointed Chancellor of the Exchequer
Andy Burnham Government Removes VAT From Electricity Bills to Cut Household Costs
Andy Burnham Becomes United Kingdom Prime Minister After Sir Keir Starmer Resigns
Miliband Sets Climate and International Law at Centre of UK Diplomacy
US Gasoline Returns to $4 as Renewed Iran Fighting Disrupts Oil Flows
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Orders 50% Tariffs on Selected Canadian Imports
Pentagon Discloses Nearly 100 US Troop Injuries During Renewed Iran Fighting
Trump Readies New Tariffs as Temporary Global Levy Nears Expiry
US Judge Pauses Paramount Skydance and Warner Bros Discovery Merger Over Antitrust Concerns
NHS England Faces Growing Retention Pressure Among Younger Midwives
UK Data Centre Expansion Faces Water and Grid Capacity Challenges
UK Defence Shares Rise After John Healey Appointment and Continued Spending Commitments
OECD Urges UK Government to Review Pension Triple Lock to Protect Public Finances
Bank of England Keeps Cautious Approach as Energy Costs Threaten Inflation Progress
County Councils Call for Wider Devolution and Long-Term Social Care Funding Reform
IMF Urges UK Government to Maintain Fiscal Discipline as Growth Forecast Slows
Russian Warship Holds Live-Fire Exercises Near UK Coast as Royal Navy Monitors Activity
Mitie Agrees Three Point One Billion Pound Takeover by OCS in Another Blow to London Listings
JPMorgan Chase Warns Bank Levies Could Hit UK Growth and Drive Capital Away
UK Unemployment Holds at Four Point Nine Percent as Labour Market Shows Resilience
UK Government Borrowing Falls Below Forecasts as Treasury Receives Early Fiscal Boost
John Healey Cuts VAT on Household Electricity Bills After Cancelling National Digital ID Scheme
Andy Burnham Forms New Labour Government With Ten-Year National Renewal Plan
EU Imposes Record €550 Million Digital Services Fine on AliExpress
UK Publishes Updated Consumption-Based Carbon Emissions Data
×