The UK economy grew by 0.5% in the second quarter of the year, official figures now show, after the Office for National Statistics revised its data this morning.
Originally marked at 0.4%, the uplift is welcome news for the government and provides the Bank of England with more wiggle room to raise rates, but the good news may not last long, experts warned.
Real household disposable income per head (the amount each person has to spend) also rose by 1%, although Susannah Streeter, chief investment strategist at Wealth Club, noted that spending power is being eroded as energy costs remain high thanks to the ongoing war between the US and Iran.
Despite the upward revision to the second quarter figures, growth is set to slow, she noted, with business confidence a key part of this.
“The Lloyds Bank Business Barometer shows UK business confidence falling 12 points to 41% in September, its lowest level since April 2025. It’s smaller firms feeling the pain more acutely, with many having less of a cushion to absorb a slowdown in customer spending and an increase in bills,” she said.
AJ Bell head of financial analysis Danni Hewson said the latest figures will reinforce the “good vibes” that have come from the government since Andy Burnham took over as prime minister in the summer, but noted there are “menacing dark clouds” on the horizon for households.
“Whilst it’s important to celebrate the resilience of the UK economy despite the headwinds of global instability, there’s no getting away from rising prices. This is already evident at the petrol pump, and energy bills look set to increase at the exact moment when people will need to use more power,” she said.
Hewson added that markets are now pricing in a quarter-point raise to interest rates in November, with another 0.25% uplift before the end of the year as stronger growth figures allow the Bank of England to focus on tackling inflation.
“Whilst MPC members have sought to reassure the public that interest rate hikes are not nailed on, financial markets are broadly pricing in a November hike and the possibility of a second quarter-point increase before the end of the year. Good vibes can lift confidence, but they can’t keep people warm,” she said.
Richard Carter, head of fixed interest research at Quilter Cheviot, added that the revised numbers provide a useful snapshot of the economy's health four weeks ahead of the chancellor's first Budget, but warned that the latest figures highlighted the challenges the government faces.
“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,” he said.
“While there have been some shoots emerging in recent months, they risk being cut down at an early stage should we see tax rises or other measures announced at the Budget.
“Ultimately, the Budget will be the first real test of whether the chancellor can square fiscal discipline with the need to support growth. Markets will be looking for a credible plan and are unlikely to give the government much benefit of the doubt. Stronger growth would make that task significantly easier, but today's figures suggest the road to a more durable recovery remains a long one."