UK Economic Growth Slowed. Your Bills Are Still Rising.

UK economic growth slowed to 0.4% between April and June, down from 0.6% in the first three months of the year, according to figures the Office for National Statistics published on 13 August. On its own that reads like a wobble. Set against a war involving Iran, a shipping lane that carried roughly a fifth of the world's oil supply, and a 13% jump in the energy price cap, it looks more like a result.

The catch is that the part of this you can actually feel has not slowed at all. Bills went up on 1 July. Inflation was running at 2.6% in June and the Bank of England expects it to peak near 3.2% by the end of the year. The base rate has been parked at 3.75% since 30 July. The economy is cooling; the cost of living is doing the opposite.

That gap traces back to one stretch of water. Brent crude settled around $87 a barrel in mid-August, and the US Energy Information Administration does not expect Middle East production to get back near pre-conflict levels until early 2027. Britain buys very little oil from the Gulf directly, but it buys it at a world price, and that price has been reset.

What the ONS Figures Actually Show

Services did nearly all the lifting, growing 0.5% over the quarter. Production was completely flat at 0.0%. Construction added 0.3%. June alone came in at 0.3%, well ahead of forecasters who had pencilled in a small fall, though May was revised down to zero. Over the year to June the economy is 1.1% larger — a modest number, but a positive one.

Look at the annual breakdown and the damage becomes visible. Services are up 1.5% on the year. Production has crawled forward 0.3%. Construction has gone backwards by 2.0%. That is the shape of an energy shock: it hits the parts of the economy that burn fuel and move heavy things, and largely spares the parts that sit at a desk.

Why UK Economic Growth Is Holding Up at All

Britain's lopsidedness is doing it a favour for once. An economy dominated by services — law, finance, health, software, hospitality — is simply less exposed to a barrel of oil than a manufacturing economy would be. EY has upgraded its outlook and now expects growth of 0.9% across 2026. That is not strong. It is also not the recession a blocked Strait of Hormuz might have suggested.

Not everyone is convinced it lasts. Yael Selfin, chief economist at KPMG, has warned that growth should moderate in the coming months as higher prices and borrowing costs work their way through. Nearly three in five businesses — 57% — told surveyors in late July that they had some level of concern about energy costs.

Where the Energy Shock Lands on Your Bills

This is where a macro story becomes a household one. The slowdown in the national figures is mild and abstract. The energy component is neither. Three things are worth checking before autumn arrives, and all three are already decided or close to it.

The 13% Rise Already Baked In

Ofgem lifted the price cap by 13% from 1 July, covering the quarter to 30 September. That increase is not a forecast — it is on the bill sitting in your inbox now. The regulator was blunt about the cause.

Today's price change reflects continued volatility in global energy markets. This means higher wholesale gas prices, driven by ongoing conflict in the Middle East, is impacting the price we pay for energy. — Tim Jarvis, Ofgem chief executive

What Happens on 1 October

The next cap takes effect on 1 October. Cornwall Insight's current forecast puts it in the region of £1,700 a year for a typical dual-fuel household, a slight fall rather than another jump. If you are weighing a fixed deal, that forecast is the benchmark to beat — and take a meter reading on 30 September so the two periods are billed correctly.

Why Rates Aren't Coming Down Yet

With inflation heading towards 3.2% in the final quarter, the Monetary Policy Committee has little room to cut. Anyone rolling off a fixed mortgage this winter should assume 3.75% is the working assumption, not a floor about to drop. Most lenders let you lock a rate six months ahead, which is worth doing while the outlook is this unsettled.

The Bill Waiting for the Chancellor

Chancellor John Healey pointed to the UK posting the fastest growth in the G7 this year, adding that the government now needs to "double down and drive growth". The Treasury has separately warned that growth could fall to 0.3% if the Strait of Hormuz stays blocked for a full year. Capital Economics reckons spending commitments imply around £25bn in tax rises.

Put that in perspective. £25bn is roughly the yield of a several-penny move on the basic rate of income tax. Even if it arrives through threshold freezes and smaller levies instead, a sum that size cannot be raised without most working households noticing.

What to Watch Between Now and Autumn

Three dates matter. The ONS publishes its next monthly GDP estimate on 11 September. The new price cap starts on 1 October. And any genuine progress on reopening Hormuz would pull oil down and, with a lag of a few months, ease the pressure on bills. Until then, treat the reassuring headline number as exactly that — a headline. Compare a fixed energy tariff against the £1,700 forecast, check your mortgage renewal window, and assume the squeeze runs into next spring rather than ending with this quarter's figures.