The UK economy grew faster than expected in the second quarter of this year, with official figures showing a 0.5% rise in gross domestic product (GDP) between April and June, revised up from a previously estimated 0.4%. This follows growth of 0.6% in the first three months of the year, according to the Office for National Statistics (ONS).
The stronger-than-expected performance means Britain was the fastest-growing economy among the G7 group of countries in the first half of the year, a welcome boost for Chancellor John Healey as he prepares for next month's Budget.
Revision for 2025 and services growth
However, the ONS also revised down its growth estimate for 2025 as a whole, from 1.3% to 1.2%. Many economists are predicting similar growth for this year.
Liz McKeown, ONS director of economic statistics, said: “Growth for 2025 as a whole was a little lower than previously estimated, with the profile of growth across the quarters also revised. However, stronger services growth in the latest quarter means the economy is now slightly larger than previously estimated.”
The ONS said second-quarter growth in the services sector stood at an upwardly revised 0.6%, with June seeing a bump as firms reported buoyant trade thanks to prolonged hot weather and the start of the World Cup football tournament.
Economists predict tougher end to the year
While the UK economy has so far defied the gloom, experts are predicting a tougher end to the year as soaring energy and fuel prices caused by the Iran war are set to weigh on spending and growth.
Most economists are predicting 1.2% growth for the year as a whole, which would point to “virtually no expansion over the second half of this year”, according to WPI Strategy chief economist Martin Beck. He said: “High petrol prices, rising household energy bills and uncertainty ahead of the Budget are likely to take some momentum out of growth over the coming months.”
Recent figures also showed the UK economy recorded surprise growth of 0.4% in July as the AI spending boom helped deliver a boost, showing a more resilient than expected start to the third quarter.
Business confidence and outlook
Danni Hewson, head of financial analysis at broker AJ Bell, said: “Good news about the resilience of the UK economy will help reinforce the ‘good vibes’ this government is keen to instil, but there’s no doubt that all of us, especially the Chancellor, have one eye on the horizon.”
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, said: “The next six months looks tougher with potential interest rate rises, a sharp increase in inflation and another tax raising budget all to come. That will drag heavily on growth over the winter.”
Meanwhile, a survey from the Institute of Directors among business leaders found optimism about the UK economy fell in August. Anna Leach, its chief economist, said: “September’s results show a growing divide between confidence in businesses’ own prospects and confidence in the wider economy. Business leaders are more confident about their own organisations, and revenue expectations have strengthened. But cost pressures remain high, squeezing margins and leaving some firms having to ‘run to stand still’. Investment and hiring intentions unsurprisingly therefore remain subdued.”
