The UK economy slowed in the second quarter as companies responded to the Chancellor’s hikes in business costs.
New data for April-June shows growth of 0.3% compared with 0.7% growth in the first quarter
Although higher than the 0.1% that was expected by economists, the data will put more pressure on Chancellor Rachel Reeves ahead of her Autumn Budget.
To a degree the first quarter figure was abnormally higher because of a rush by exporters in the first quarter to beat President Trump’s April levies.
The second quarter slowdown reflects the Chancellor’s higher taxes and the rise in minimum wages which have hit recruitment and business order books.
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said: “The economy performed a little better than expected over Q2, with activity growth recovering well in June.
“However, the underlying pace of growth is weak and is likely to remain so through the second half of the year, as real incomes are squeezed by higher inflation and fiscal policy is set to tighten in the autumn Budget.
“For now though, this report is likely to confirm the impression among Bank of England policymakers that there is no rush to cut rates again soon, and the September meeting is very likely to see interest rates kept on hold.”
Today’s figures cover the end of Rachel Reeves’ first year in charge of the economy.
In that time she has repeatedly said her “number one aim” is to “kickstart economic growth”. Writing in The Guardian she says she anticipates criticism but argues she is taking steps to break a “cycle of low growth” under the Conservatives.
“Britain’s economy is not broken, but I know that in recent years it has got stuck,” she writes.
Responding to this morning’s figures she said: “Today’s economic figures are positive with a strong start to the year and continued growth in the second quarter. But there is more to do to deliver an economy that works for working people.
“I know that the British economy has the key ingredients for success but has felt stuck for too long.
“That is why we’re investing to rebuild our national infrastructure, cutting back on red tape to get Britain building again and boosting the national minimum wage to make work pay. There’s more to do and today’s figures only fuel my ambition to deliver on our Plan for Change.”
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