The UK economy performed better than initially forecast in the second quarter, with gross domestic product growing by 0.5 per cent rather than the estimated 0.4 per cent, driven largely by strong services sector output. This upgrade means the overall economy is now slightly larger than previously calculated, providing a modest boost before the summer Budget. However, this positive revision is tempered by downgraded full-year 2025 growth figures and significant headwinds ahead.

The Office for National Statistics attributed Q2's outperformance to warm weather and the World Cup football tournament stimulating consumer spending. Yet economists warn of a tougher remainder of 2025, with annual growth expected at just 1.2 per cent—suggesting virtually no expansion in the second half of the year. The Iran war's impact on energy and fuel prices poses a major threat, with household energy bills forecast to surge by 16 per cent in January, the largest increase in four years, which will likely suppress spending and economic momentum through autumn and winter.