UK economy stalls in second quarter
The UK economy grew at a sluggish pace of 0.3 per cent in the second quarter of the year, official data has shown, another major setback for Chancellor Rachel Reeves’ as she hopes to oversee higher growth.
The Office for National Statistics left its growth figure unchanged from a previous estimate as it confirmed its figures for growth in the second quarter, which is likely to be viewed cautiously by Treasury officials.
The figure is much smaller than 0.7 per cennt growth seen in the first three months of the year, with firms reporting they had front-loaded spending in the year to get ahead of any potential global tariffs war unleashed by President Trump.
A one per cent surge in construction and 0.4 per cent rise in the services sector prevented the UK economy from decline, with production falling by 0.8 per cent and weighing down on results.
The ONS also said business investment fell 1.1 per cent between April and June, a key measure for showing whether companies are looking to expand at pace.
Over a year’s period, the UK economy grew slightly higher than expected at 1.4 per cent.
Data also showed that real household disposable income edged up slightly by 0.2 per cent after a sharper fall in the first three months of the yer.
The ONS’ latest publication may spoil the mood at the Labour Party conference in Liverpool, with a ‘business day’ on Monday seeing government officials hear from private sector chiefs on tax and regulation.
Among those attending were representatives from major industry groups such as the Confederation of British Industry (CBI) and the British Chambers of Commerce (BCC) as well as bank chiefs from the likes of Citigroup UK.
In a speech in the afternoon, Reeves told conference attendees that “harder” choices would come ahead given expected growth downgrades and higher borrowing cost estimates by the Office for Budget Responsibility (OBR) will likely create to a £30bn shortfall in public finances.
She also used her speech to talk up investment and re-iterate the importance of “securonomics”, taking a swipe at critics who have called on her to spend more or adjust her fiscal rules.
Reeves and ministers including Darren Jones have refused to rule out increasing VAT at this year’s Budget, claiming that manifesto commitments not to raise it “stand”.
A VAT rise could include broadening the base of products that the tax is charged on though reports have suggested that Reeves could look to reduce energy prices by creating another exemption, a move she may hope could drive growth across the UK.
Senior Downing Street officials also admitted public finances were in a “difficult” state and tax rises look all but certain later this year.