30th September 2026
Britain's economy is growing but agonisingly slowly.
The latest Office for National Statistics figures show that GDP increased by 0.5% between April and June, following growth of 0.6% in the first quarter. Compared with a year earlier, the economy was 1.4% larger.
GDP per head also increased, by 0.5% during the quarter and 1.2% compared with a year earlier.
So why does the economy still feel difficult for so many households and businesses?
The answer is contained in the detail behind the headline numbers.
The latest ONS Quarterly Economic Commentary provides a useful snapshot of Britain in the summer of 2026. It shows an economy that is growing, but where households remain cautious, businesses are dealing with rising costs and weaker demand, employment is beginning to soften and the Government is borrowing considerably more than expected.
In other words, the economy is moving forward, but not necessarily in a way that makes everyone feel better off.
Services were the main contributor to growth in the second quarter, particularly professional, scientific and technical activities and information and communication. Business investment also increased by 1.8% during the quarter and was 5.2% higher than a year earlier.
Those are encouraging figures.
But there is a striking contrast when we look at consumers.
Household spending increased by only 0.3% in the quarter. Consumer confidence remained subdued and the proportion of household income being saved increased slightly to 8.8%.
That suggests many households are still behaving cautiously.
People may have more disposable income than they did previously, but that does not necessarily mean they feel confident enough to spend it. After several years of higher food, energy, housing and other costs, many households may be more interested in rebuilding savings or maintaining a financial buffer than making major purchases.
That matters because consumer spending is a major part of the economy.
If households remain cautious, businesses dependent on discretionary spending can struggle even while the overall economy continues to grow.
The business figures tell a similar story.
Investment is increasing, but the ONS says demand uncertainty, cost pressures and borrowing costs continue to restrict investment, particularly in construction and property. Its latest business survey found that 28% of trading businesses reported lower turnover in August.
That is a long way from an economy in recession, but it is hardly evidence of businesses operating in an environment without problems.
The labour market provides another warning.
Unemployment remained at 4.9%, but early estimates suggest that payrolled employment fell by 0.5% in the year to August. Vacancies have also been falling and stood at 702,000 in the three months to August, their lowest level since February to April 2021.
The jobs market therefore remains relatively strong by historical standards, but some of the momentum appears to be disappearing.
Then there is inflation.
The annual CPI inflation rate increased to 3.1% in August from 2.9% in July. Transport and fuel costs were the largest contributors to the increase.
This is particularly important because energy and transport costs do not remain confined to petrol stations and electricity bills. Higher fuel prices feed into the cost of transporting food, delivering goods, running businesses and providing services.
The ONS says the recent rise in oil prices is already contributing to higher motor fuel prices and wider supply-chain pressures. The effect on household gas and electricity prices will emerge with a lag.
For households, there is another immediate reminder of the problem. The Ofgem energy price cap rises by 4% in October, from £1,663 to £1,723 for a typical household.
Food inflation was still relatively subdued at 1.3% in August, but the ONS warns that some of the recent increases in energy and transport costs could feed through into food prices later.
That is why an economy can be growing while people still feel under pressure.
The economy measures the value of everything produced. It does not measure how comfortable a household feels when its heating bill, petrol bill, food bill and insurance renewal all arrive at roughly the same time.
There is another problem which will become increasingly important as the Government approaches the October Budget.
Public sector borrowing reached £77.3 billion in the financial year to August. That was £8.1 billion higher than the Office for Budget Responsibility had forecast in March.
Government debt was provisionally estimated at almost £3 trillion, equivalent to 93.8% of GDP.
Higher inflation and higher government bond yields are also increasing the cost of servicing that debt.
This leaves the Chancellor facing a difficult combination. The economy is growing, but not spectacularly. Households remain cautious. Businesses face higher costs. Employment indicators are weakening. Inflation is above target. And government borrowing is running ahead of the forecast.
None of this means Britain is heading for recession.
Indeed, the latest figures show the opposite. The economy is growing and business investment has strengthened.
But perhaps the figures explain something that is often missed in political and economic arguments.
Economic growth and economic comfort are not the same thing.
A country can grow while households remain cautious. It can create wealth while some communities lose well-paid jobs. It can have rising investment while small businesses struggle with costs. And GDP can increase while government finances become more difficult.
For people in places such as Caithness, there is an additional question.
How much of this growth reaches the local economy?
If much of the expansion is concentrated in professional services, information, communications and other activities clustered around larger cities, national GDP can improve without necessarily transforming the economic prospects of rural communities.
That is why the next stage of the debate should perhaps be about the quality and location of growth, not simply whether GDP is rising.
Britain is growing.
But the ONS figures suggest it is still an economy operating under considerable pressure.
And for households preparing for another increase in energy costs, businesses watching their turnover and a Chancellor looking at a borrowing figure already £8.1 billion above forecast, that distinction matters.
The economy may be growing. The question is whether it is growing strongly enough, widely enough and in the right places for people to actually feel the difference.
Read the full ONS report HERE