The UK economy expanded by 0.3% in the three months to June, official figures show, surpassing forecasts of a 0.1% slowdown. The Office for National Statistics (ONS) reported that growth slowed from 0.7% in the first quarter but was buoyed by a 0.4% rise in June, following two months of contraction.
The services sector led growth with a 0.4% expansion, driven by computer programming, health, and vehicle leasing. Construction output rose 1.2%, supported by large infrastructure projects, while manufacturing grew 0.3%, down from 1.1% in the first quarter as firms front-loaded activity ahead of US tariffs.
Chancellor Rachel Reeves welcomed the figures but acknowledged challenges ahead. 'The British economy has the key ingredients for success but has felt stuck for too long,' she said. The ONS revised April's GDP contraction from -0.3% to -0.1%, and noted that some activity was brought forward to February and March due to stamp duty and tariff changes.
Despite the stronger-than-expected data, the economy faces headwinds from Donald Trump's trade war and a sluggish domestic outlook. Business investment fell 4% in the second quarter, and economists expect growth to slow in the second half. The Bank of England, which cut interest rates to 4% last week, warned that rising inflationary pressures could delay further cuts.
The chancellor is preparing for a difficult autumn budget amid a estimated £40bn+ deficit, with speculation over tax rises. Business leaders criticised the recent £25bn increase in employer national insurance contributions, warning that further tax rises would hurt firms. Shadow chancellor Mel Stride accused Reeves of 'economic vandalism', while the UK remains the fastest-growing G7 economy in the first half of the year, pending Japanese data.
