British Economy Tracking Materially Stronger Than Expected According to UBS

Britain’s economy is demonstrating considerably stronger second quarter growth than UBS had anticipated, following the return of GDP expansion in May. The investment bank noted that the figures suggest limited economic fallout thus far from the Middle East energy shock.

GDP increased by 0.1% on a month-on-month basis, surpassing market expectations of stagnation and reversing the 0.1% contraction recorded in April. UBS calculated that output across April and May remained consistent with quarterly growth of 0.4%, substantially exceeding its current forecast of 0.1%.

The services sector provided the primary impetus for the rebound, expanding by 0.3% as professional and scientific activities alongside administrative support recovered from April’s declines. In contrast, industrial production declined by 0.5%, whilst construction output fell by 0.8% owing to weaker repair and maintenance work.

UBS economists acknowledged that the latest GDP release clearly implies upside risk to their second quarter GDP forecast and, by extension, the 2026 annual average. Nevertheless, the bank has maintained its full year forecasts of 1.0% growth for 2026 and 1.1% for 2027, cautioning that stronger first half activity could be followed by weaker growth later in the year.

The investment bank expressed continued caution regarding potential payback in the second half, observing that residual seasonal effects may have boosted recent first half growth figures.

UBS AG is a Swiss headquartered global financial services group providing wealth management, investment banking, asset management and banking services.