UK: Resilient Growth Outlook — Deutsche Bank

Deutsche Bank Research's latest report highlights that the UK economy has shown surprising resilience in the face of Iran-related energy shocks in 2026. Data shows that the country's gross domestic product (GDP) grew 0.6% quarter-on-quarter in the first quarter and 0.4% in the second quarter, placing it at the forefront of the G7 group.

**Growth Momentum Exceeds Expectations**

The team, led by analysts Sanjay Raja and Maui Brennan, believes that the UK's real growth performance has outperformed the Bank of England's Monetary Policy Committee (MPC) baseline scenario. The report notes that, thanks to stronger catch-up growth in the first quarter of 2026, output has proven more resilient, with its growth trajectory closer to the MPC's optimistic Scenario A. Second-quarter growth data has also continued this momentum, approaching potential output levels.

**Resilience and Risks Coexist**

Despite strong short-term growth data, market views on the UK's long-term economic outlook are not uniformly optimistic. Deutsche Bank itself, in earlier reports, has also expressed caution regarding the UK economy's resilience. The bank's senior economist Sanjay Raja previously warned that some economic models may overstate the UK economy's resilience, and that persistent inflationary pressures and a high-interest-rate environment could still weigh on economic growth in the coming years, with the risk of recession remaining elevated. This suggests that whether the current growth resilience can translate into a long-term trend remains to be seen.