UK economy grew ‘slightly larger’ than expected in pre-Budget boost to John Healey

The UK economy performed better than initial estimates during the second quarter, as warm weather and the World Cup helped offset impacts from the war in Iran, according to official data.

The Office for National Statistics (ONS) reported that gross domestic product (GDP) grew by 0.5 per cent between April and June, upgraded from a prior 0.4 per cent estimate following stronger services sector output.

This comes after a 0.6 per cent rise in the year's opening three months.

However, revisions to earlier figures show that overall expansion for 2025 was lower than previously recorded, downgraded to 1.2 per cent from 1.3 per cent.

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.

The latest forecast from analysts Cornwall Insight on Wednesday warned annual household energy bills could soar by 16 per cent in January – the largest rise for four years.

Most economists are predicting 1.2 per cent 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 per cent, 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 per cent in July as the AI spending boom helped deliver a boost, showing a more resilient than expected to start to the third quarter.