The UK economy experienced sluggish growth of 0.3 per cent in the second quarter of the year, according to official data, marking another significant blow for Chancellor Rachel Reeves’ aspirations for higher growth.
The Office for National Statistics (ONS) maintained its previous growth estimate as it confirmed the figures for the second quarter’s growth, a development that is likely to be met with caution by Treasury officials.
This figure is significantly lower than the 0.7 per cent growth observed in the first three months of the year, with businesses reporting that they had accelerated spending earlier in the year to pre-empt any potential global tariffs war instigated by President Trump.
A one per cent surge in construction and a 0.4 per cent increase in the services sector prevented the UK economy from declining, despite a 0.8 per cent drop in production which negatively impacted the results.
The ONS also reported a 1.1 per cent decrease in business investment between April and June, a crucial indicator of whether companies are planning to expand rapidly, as reported by City AM.
Over a year, the UK economy grew slightly more than anticipated at 1.4 per cent.
The data also revealed a slight 0.2 per cent increase in real household disposable income following a steeper decline in the first three months of the year.
The latest publication from the ONS may dampen spirits at the Labour Party conference in Liverpool, particularly on ‘business day’ when government officials will hear from private sector leaders about tax and regulation.
Among those in attendance were delegates from major industry bodies including the Confederation of British Industry (CBI) and the British Chambers of Commerce (BCC), alongside banking executives from institutions such as Citigroup UK.
During an afternoon address, Reeves informed conference participants that “harder” decisions lay ahead, given anticipated growth downgrades and elevated borrowing cost projections by the Office for Budget Responsibility (OBR) will probably generate a £30bn gap in public finances.
She also utilised her address to champion investment and reiterate the significance of “securonomics”, taking aim at detractors who have urged her to increase spending or modify her fiscal rules.
Reeves and ministers including Darren Jones have declined to exclude raising VAT in this year’s Budget, asserting that manifesto pledges not to increase it “stand”.
A VAT increase might involve expanding the range of products subject to the levy, though reports have indicated that Reeves could seek to lower energy costs by establishing another exemption, a strategy she may hope could stimulate growth throughout the UK.
Senior Downing Street officials have also acknowledged public finances were in a “difficult” position and tax increases appear virtually inevitable later this year.
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