Britain's economy grew slightly faster in the second quarter than first thought, according to revised figures from the Office for National Statistics (ONS) released on Wednesday. The quarterly expansion was revised up to 0.5% from the 0.4% previously reported, offering a modest boost to Prime Minister Andy Burnham ahead of the government's annual budget update next month.
The upward revision was largely driven by stronger performance in professional, scientific and technical services, following updated business survey data. Services output rose by 0.6% in the quarter, compared with the earlier estimate of 0.5%. Advertising, scientific research, legal services and computer programming were among the main contributors, the ONS said.
“Stronger services growth in the latest quarter means the economy is now slightly larger than previously estimated,” said Liz McKeown, ONS director of economic statistics, in a statement.
Construction also expanded by 0.8%, while production output slipped by 0.1%. The revised figures still represent a slowdown from the 0.6% growth recorded in the first quarter of the year.
Household finances improve, but headwinds remain
Households saw a welcome improvement in their finances: real disposable income per head rose by 1.0% in the second quarter, reversing a 0.8% decline in the previous three months. That recovery reflects stronger wage growth and easing price pressures during the period.
However, economists caution that the underlying picture remains fragile. “Growth has come in marginally better than initially expected, but it remains difficult to come by as households and businesses contend with high borrowing costs, inflationary pressures and a cooling labour market,” said Richard Carter, head of fixed interest research at Quilter Cheviot.
Carter noted that since the second quarter, “the outlook has become more uncertain” following a recent surge in energy prices and a sharp rise in government bond yields, which this month reached multi-decade highs. Inflation has also been creeping up again, adding pressure on consumers and companies alike.
The UK's fiscal position is under scrutiny as Chancellor John Healey prepares to unveil the budget on 28 October. Healey has pledged to maintain strict fiscal discipline, but analysts warn that tax increases or spending cuts could undermine the tentative signs of growth.
“Ultimately, the Budget will be the first real test of whether the Chancellor can square fiscal discipline with the need to support growth,” Carter said. “Markets will be looking for a credible plan, and are unlikely to give the government much benefit of the doubt.”
The revised GDP figures come at a time when Europe's largest economies are facing similar challenges. Across the continent, high interest rates and weak external demand have weighed on growth, though some countries are showing resilience. For instance, Portugal's employment growth leads the EU, even if its GDP performance has been less impressive. Meanwhile, Germany's startup revival offers a glimmer of innovation-driven growth, but structural hurdles remain.
The UK's upward revision is a positive signal, but it does little to change the broader narrative of a stagnating economy. With borrowing costs still elevated and inflation above target, the path forward remains uncertain. The upcoming budget will be crucial in determining whether the government can strike the right balance between fiscal prudence and supporting growth.
