The slowdown in growth over the three months to the end of June compared to the start of the year reflected the ongoing impact of the war in Iran as well as political uncertainty in the run up to Sir Keir Starmer’s resignation as prime minister at the end of June.
Chancellor of the Exchequer, John Healey MP said: “I know people are worried about the impact of the conflict in the Middle East on their cost of living, which has been too high for too long and it has added pressure on British businesses.”
He said the government’s aim was to make the country “more resilient” and to “drive growth in every postcode”.
Shadow chancellor Sir Mel Stride said Labour had “mismanaged the economy with their tax and borrowing spree, leaving it weak and vulnerable to the effects of shocks like the Iran War.
“Labour need to realise that it’s their poor decisions which have stifled growth and made the cost of living worse,” he said.
Fergus Jimenez-England, Associate Economist National Institute of Economic and Social Research said the UK economy had “weathered the recent energy shock better than many feared”, but said the recent pace of growth was unlikely to be sustained.
“Both inflation and unemployment are set to rise in the coming months while business sentiment remains fragile and could dampen further with ongoing energy price volatility.
“The economy has shown welcome resilience so far, but we are not out of the woods yet.”
Among the largest contributors to growth in the second quarter were computer programming, consultancy and related activities which were up by 3.7%; advertising and market research, which grew 4.3%; and scientific research and development, up 3.9%.
Suren Thiru, ICAEW chief economist, said households and firms had “largely shrugged off the shockwaves from the Iran war”.
But he also expected weaker growth in the second half of the year, making the chancellor’s Budget in October “more challenging”.
