Gross domestic product rose 0.5% in the second quarter, the Office for National Statistics said on Monday, a downgrade from its previous estimate of 0.6%. It follows growth of 0.7% in the first quarter. Economists had expected no revision.
The figures are a blow for Prime Minister Keir Starmer, who is counting on growth to help deliver the improvements to public services promised to voters. Starmer has pledged to lift growth to 2.5%, well above the levels seen since the financial crisis and the rate expected by forecasters in the coming years.
There are further signs that the economy has lost further momentum since Labour took office in July, in part due to its own warnings about the state of the public finances.
Output flatlined in July for the third time in four months and confidence is weakening amid fears that Chancellor Rachel Reeves will announce tax rises and spending cuts in her budget on Oct. 30 to fill what she claims is a black hole left by the Conservatives. Recent surveys point to the economy slowing to growth of around 0.3% a quarter.
The National Accounts incorporated historic revisions as well as the first reweighting of of the relative size of each sector since the pandemic. The economy grew 0.3% last year, more than the 0.1% previously estimated but the second half of the year was still in recession.
The saving ratio rose to 10%, the highest since 2021, suggesting consumers remain cautious. That’s despite real disposable income per head rising 1% over the quarter, as wages outstripped inflation.