UK Economic Growth Held Up. Your Gas Bill Didn't.

UK economic growth slowed to 0.4% between April and June, down from 0.6% in the first quarter, according to official figures released on Thursday. Given that Britain spent those three months absorbing a Middle East war, a blocked shipping lane and the steepest rise in household energy costs since 2022, most economists read that number as the economy bending rather than breaking.

Your gas bill tells a rather different story. The energy price cap rose 13% on 1 July, but the increase was not shared evenly. Gas went up around 24% under the cap, while electricity rose roughly 5%. On Ofgem's older measure of typical consumption, a dual-fuel household paying by direct debit moved from £1,641 a year to £1,862 — about £221 more, or £18 a month.

The cause is a long way from your meter cupboard. Oil and gas prices spiked after US strikes on Iran in late February, and Brent crude has since been trading close to $90 a barrel, roughly a quarter above its pre-conflict level. The Strait of Hormuz, which carries a large slice of the world's seaborne oil and gas, still isn't working normally.

Why UK Economic Growth Held Up at All

Services did the heavy lifting, expanding 0.5% over the quarter, with information and communication firms up 2.7%. Construction added 0.3% and production was flat. June alone grew 0.3%, ahead of forecasts, though May was revised down to zero. Sanjay Raja, Deutsche Bank's chief UK economist, said households spent more than anticipated and that hot weather pushed consumers to ramp up spending.

Yael Selfin, KPMG's chief economist, made a similar point, noting that consumers have faced a run of shocks this year and weathered them remarkably well. The catch is that sunshine spending and one-off timing effects don't repeat. Strip them out and the underlying picture is thinner than the headline figure suggests.

Seasonal quirks are flattering activity in the first half of the year, with growth likely to lose some steam later in 2026 — George Brown, senior economist at Schroders

What the 13% Cap Rise Does to Your Bills

The cap isn't a limit on your total bill. It caps unit rates and standing charges, so what you actually pay still depends on what you burn. That is why the July change lands so unevenly across households, and why the split between the two fuels matters more than the single 13% headline.

Why Gas Took the Bigger Hit

Britain heats most of its homes with gas and buys much of it on international markets, so a global supply scare feeds through quickly. Electricity prices are cushioned by the growing share of wind and solar in the mix, which is why they climbed roughly a fifth as fast. A gas-heated home therefore feels this rise far harder than an all-electric flat.

Three Things Worth Checking Now

None of this needs a spreadsheet. Half an hour before the autumn hits is enough to avoid the worst of it:

• Your direct debit level — suppliers often adjust it upward automatically, and an over-collected credit balance is your money sitting in their account.
• Whether a fixed tariff now undercuts the cap for a gas-heavy home, since the cap changes again in October.
• Eligibility for the Warm Home Discount and Priority Services Register, both of which people routinely forget to claim.

The Rate Decision That Nearly Went the Other Way

The Bank of England held Bank Rate at 3.75% on 29 July, but the vote was 6–3, with three members pushing for 4%. Inflation was 2.6% in June and the Bank expects it to peak near 3.2% in the final quarter. For perspective, during the 2022 energy crisis the cap was set above £4,000 before ministers intervened, and Bank Rate eventually reached 5.25%. This is a smaller shock hitting a more tired economy.

What Happens If the Strait Stays Shut

The Treasury has warned that if the blockage persists through the rest of 2026, growth would slow to roughly 0.3% — and the Bank would likely be raising rates into that weakness rather than cutting. Economists at EY have gone further, saying a prolonged disruption to about a fifth of global oil and gas supply could tip Britain into recession. The US Energy Information Administration does not expect Middle East production near pre-conflict levels before early 2027.

What to Watch Before 28 October

Chancellor John Healey delivers his first Budget on Wednesday 28 October, and the arithmetic is unforgiving. Ten-year gilt yields have pushed towards 4.9%, close to an 18-year high, which makes borrowing dearer just as fiscal headroom disappears. Capital Economics reckons around £25 billion in tax rises may be needed. Stuart Morrison of the British Chambers of Commerce has warned of cost pressures choking long-term business growth.

So treat the second-quarter number as a snapshot, not a forecast. The dates that will actually shape your finances are the next inflation print, Ofgem's October cap announcement and Budget day itself. If you heat with gas, assume the pressure builds rather than eases from here — check your tariff and your direct debit now, while switching still costs you nothing but an afternoon.