Boost to Chancellor John Healey as UK economic system grows sooner than anticipated
Official data shows the economy grew by 0.5% in the second quarter of this year but experts predict a slowdown
Chancellor John Healey has been tasked with growing the economy to raise vital taxes to fund spending(Image: Ian Vogler / Daily Mirror)
Britain’s economy grew faster than expected earlier this year as a hot weather and World Cup boost offset the impact of the Iran war.
Figures from the Office for National Statistics showed gross domestic product – the value of everything the country churns out – increased by 0.5% between April and June, revised up from a previously estimated 0.4%. It follows growth of 0.6% in the first three months of the year.
It meant the UK was the fastest growing economy among the G7 group of countries in the first half of the year, a welcome confirmation for Chancellor John Healey as he prepares for next month’s Budget.
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However, the ONS also concluded that the economy didn’t do quite as well as it first thought last year, as it revised growth for 2025 down from 1.3% to 1.2%. Many economists are predicting similar growth over the whole of 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.”
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.”
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.
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 to start to the third quarter.
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.
“There are plenty of menacing dark clouds hinting at more pain for household budgets – pain which the Treasury has little scope to prevent.”
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 fund 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.”
