The UK economy expanded by 0.3% in the three months to June, according to official figures, slowing from 0.7% in the first quarter but beating expectations of a sharper slowdown. The Office for National Statistics (ONS) said growth was supported by a 0.4% rise in June, following two months of contraction, and revised April's fall from -0.3% to -0.1%.
The services sector, which dominates the economy, grew by 0.4% in the quarter, driven by computer programming, health and vehicle leasing. Construction output rose by 1.2% on the back of large infrastructure projects, while manufacturing grew by 0.3% after a stronger first quarter when firms rushed orders ahead of tariff changes.
Chancellor Rachel Reeves welcomed the figures, saying they showed a strong start to the year and continued growth, but added: "There is more to do to deliver an economy that works for working people." The data comes as she prepares for an autumn budget, with the government facing an estimated deficit of more than £40bn and speculation over tax rises.
Business groups warned that headwinds remain. Stuart Morrison of the British Chambers of Commerce said tax burdens and uncertain global trading conditions created a "very challenging environment" for small and medium-sized enterprises. The figures also showed business investment fell by 4% in the second quarter, though it was 0.1% higher than a year earlier.
Economists expect growth to slow in the second half, with ING's James Smith citing the impact of trade wars and a sluggish domestic outlook. The stronger-than-expected performance could complicate the Bank of England's path to further interest rate cuts, after it reduced its base rate to 4% last week.
