DAVY VIEW

UK gross domestic product (GDP) grew strongly in H1, with business investment and manufacturing the standout results in Q2. However, strong H1 growth has been quite typical in recent years, and we expect that a weaker H2 is likely. This would leave growth in 2026 overall at a relatively underwhelming pace, meaning the Bank of England’s main focus should remain on the labour market and monitoring for second-round effects of higher energy prices. We still see no reason to hike Bank Rate this year.