The economy is expected to experience a slowdown in GDP growth during the second half of 2026, continuing a post-pandemic pattern in which strong expansions at the start of the year lose momentum as the months progress. According to a recent Treasury survey of economists, the country’s GDP grew by 0.6 percent in the first quarter and 0.4 percent in the second—the fastest pace among G7 nations in the first half. However, projections indicate growth will taper to 0.2 percent in the third quarter and just 0.1 percent by year-end.

Analysts attribute the anticipated deceleration partly to inflation rates rising above 3 percent, which has dampened household spending power. Added to this are uncertainties surrounding Chancellor John Healey’s upcoming Budget, which is generating caution among businesses and consumers ahead of potential tax changes in October.

Beyond these factors, the recurring pattern of stronger growth in the early part of the year followed by a slowdown in later quarters has reignited debate among economists over whether current seasonal adjustment methods fully account for systematic calendar effects in economic data. The Office for National Statistics (ONS) employs seasonal adjustments to remove predictable fluctuations, such as increased consumer activity during holiday periods. However, “residual seasonality” refers to seasonal patterns that persist despite these adjustments.

Economists note the economy’s consistent tendency to underperform in the latter half of the year, first becoming noticeable around 2024. For example, in 2025, the economy expanded 0.6 percent in the first quarter, then decelerated to a 0.1 percent quarterly pace by year-end. This seasonal pattern distinguishes the country’s GDP performance from peers like the United States, where such fluctuations are less pronounced.

Some experts suggest that these fluctuations may reflect a series of one-off political and economic events rather than data anomalies. In early 2025, growth acceleration was partly driven by companies advancing purchases ahead of US President Donald Trump’s proposed tariffs. The remainder of that year saw heightened uncertainty during the lead-up to then-Chancellor Rachel Reeves’ second Budget and disruptions from a cyberattack on Jaguar Land Rover, which halted production for more than a month.

Oxford Economics chief UK economist Andrew Goodwin observes evidence that spending has increasingly concentrated in the first quarter since the pandemic, creating challenges for seasonal adjustment models. Goodwin notes it could take several years to determine whether this shift is a temporary anomaly or a structural change requiring adjustment by the ONS.

The ONS, currently undergoing a program to enhance its economic surveys, published a detailed report in May affirming the validity of its seasonal adjustment methods, stating there is “no evidence of residual seasonality.” The Office for Statistics Regulation, which oversees the ONS, has cautioned that detecting emerging seasonal patterns can require several years of data, suggesting early signs may not yet be apparent.

GDP figures are politically sensitive, and both government and opposition frequently interpret monthly shifts to support competing narratives. Chancellor Healey acknowledged the strong second-quarter performance in August, calling for intensified efforts to stimulate growth nationwide. However, economist James Smith of ING cautions that the recurring midyear slowdown fuels “unhelpful” narratives—ranging from initial optimism to fears of recession as the year progresses.

Rob Wood of Pantheon Macroeconomics attributes the likely second-half slowdown to the uncertainty generated by the forthcoming Budget, describing the process as a “circus” unique to the country compared to more orderly fiscal cycles elsewhere. Meanwhile, Capital Economics’ Paul Dales views the early-year strength as somewhat overstated but finds the overall economic outlook relatively robust, especially given external shocks such as the surge in energy prices linked to the conflict in Iran. He forecasts GDP growth of 1.2 percent for 2026, slightly below last year’s 1.4 percent but close to the Office for Budget Responsibility’s potential growth estimate of around 1.5 percent.

“The main story is the economy has been surprisingly resilient to the precise price shock,” Dales said, characterizing the outlook as moderately positive despite expected headwinds in the latter half of the year.