The UK economy grew faster than expected in the second quarter, but the pace of expansion slowed sharply from the start of the year, underlining the challenge facing chancellor Rachel Reeves as she tries to meet her fiscal goals.
Official figures from the Office for National Statistics showed gross domestic product rose 0.3% between April and June, beating forecasts of 0.1%.
That marked a steep deceleration from the 0.7% growth in the first quarter, which the ONS said was boosted by activity being brought forward ahead of US tariff changes and a stamp duty adjustment in April.
On an annual basis, the economy expanded 1.2%. June alone saw growth of 0.4%, following two months of declines. Services output rose 0.4% in the quarter, construction 1.2%, while the production sector shrank 0.3%.
The slowdown comes alongside a worsening trade position. The UK’s trade deficit widened to £5.02 billion in June from £4.55 billion in May as exports fell faster than imports.
Saxo UK’s Neil Wilson said the economy is “now looking a lot weaker” after a strong start to the year, warning of “stagflationary doom loop” conditions with high inflation, slowing growth and fiscal strain.
Reeves is already grappling with what some economists call a fiscal black hole, raising the risk of tax rises that could weigh further on consumer and business confidence.