Key facts
- UK economy grew 0.3% in June, surpassing forecasts.
- Second-quarter GDP growth was 0.4%.
- Services sector grew 0.5% in Q2, while manufacturing was flat and construction grew 0.3%.
- May's growth figure was revised down to zero.
- Future economic outlook is dependent on geopolitical events in the Middle East and the Strait of Hormuz.
Britain's economy grew by 0.3% in June, exceeding economists' expectations of zero growth, according to official data from the Office for National Statistics. The quarterly reading for April to June showed a 0.4% expansion, with the services sector driving growth at 0.5%. Manufacturing remained flat, while construction saw a 0.3% expansion. May's growth figure was revised down to zero. Liz McKeown, director of economic statistics at the ONS, noted that growth slowed in the second quarter but remained relatively robust, highlighting strong performance in computer programming and advertising, while wholesale was a weakness. The economic outlook for the rest of the year is uncertain, with potential headwinds from geopolitical tensions in the Middle East, particularly concerning the Strait of Hormuz. Treasury warnings suggest that if the strait remains blocked, UK GDP growth could be as low as 0.3%. The Bank of England has indicated it would raise interest rates in such a scenario. Economists at EY cautioned that a prolonged blockage could lead to a recession, given that the Gulf region accounts for about a fifth of global oil and gas supplies. Government spending has been a significant contributor to recent growth. Chancellor John Healey faces pressure to deliver a confidence-boosting budget amidst these challenges, with potential tax increases of around £25 billion needed to fund spending commitments on energy and defence.