Economy 4 min read By Callum Montgomery
UK Q2 GDP Growth Revised Up to 0.5% as Services and Exports Beat Forecasts
The UK economy grew faster than initially estimated in the second quarter, with stronger services output and export activity driving the upward revision. The figures offer a boost to the government ahead of the autumn Budget.
The UK economy expanded by 0.5 per cent in the second quarter of the year, a sharper pace than previously estimated, as stronger activity in the services sector and a solid export performance lifted output. The upward revision, published by the Office for National Statistics, confirms that growth beat earlier forecasts and suggests the economy carried more momentum into the summer than analysts had assumed.
The revision marks a modest but significant improvement on the first estimate, which had put quarterly growth at a lower level. Services, which account for roughly four-fifths of UK economic output, were the principal driver of the upgrade, with professional, scientific and technical activities, as well as information and communication, contributing strongly. Export volumes also came in higher than first thought, helped by demand from key trading partners and a weaker pound that made British goods and services more competitive overseas.
The figures will be welcomed in Whitehall, where the Chancellor has been under pressure to demonstrate that the economy is on a firmer footing ahead of the autumn Budget. Stronger growth typically translates into higher tax receipts, giving the Treasury slightly more fiscal room, though economists cautioned that the improvement remains modest by historical standards and that the public finances are still stretched.
Business groups responded with cautious optimism. The Confederation of British Industry noted that while the services sector continues to underpin growth, manufacturers remain constrained by weak global demand and higher input costs. The British Chambers of Commerce said the revision was encouraging but warned that many firms are still holding back on investment because of uncertainty over future tax and trade policy.
Analysts had expected a smaller upward revision, and the surprise has prompted some forecasters to nudge up their full-year growth projections. However, the underlying picture remains uneven. Household consumption grew only modestly as consumers continued to feel the squeeze from elevated borrowing costs and the lingering effects of past inflation. Business investment, while slightly stronger than in previous quarters, remains below pre-pandemic levels.
The Bank of England will weigh the revised data as it considers the path for interest rates. Policymakers have signalled that they are watching wage growth and services inflation closely, and a stronger growth reading could complicate the case for near-term rate cuts. Markets reacted modestly, with sterling firming slightly against the dollar before giving back some of its gains.
Looking ahead, economists said the third quarter would need to sustain momentum for the improved figures to translate into a meaningful upgrade to annual growth. Much will depend on whether the recovery in exports holds and whether consumers regain confidence as real incomes recover. For now, the revised data offer a rare piece of positive economic news for a government that has struggled to convince voters that its growth plan is working.
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