The British economy performed better than expected in the second quarter of the year as it weathered the impact of U.S. tariffs and a higher business tax, official data showed Thursday.
Gross domestic product (GDP) grew 0.3% in the April-June period, the Office for National Statistics (ONS) said in a statement, beating analyst forecasts of 0.1% growth after but slowing from 0.7% growth registered in the first quarter.
"Today's economic figures are positive with a strong start to the year and continued growth in the second quarter," said Treasury chief Rachel Reeves.
"But there is more to do to deliver an economy that works for working people," she added in a statement, following a challenging first year in power for the Labour government as the economy struggles to grow significantly.
ONS data on Thursday showed that growth in U.K. construction and services in the second quarter helped to offset a drop in production.
"Growth was led by services, with computer programming, health and vehicle leasing growing," noted Liz McKeown, ONS director of economic statistics.
Overall GDP grew 0.4% in June after contracting slightly in April and May, the statistics office added.
June's figure "will be welcome news for the government, which has had a frustrating time chasing elusive growth," noted Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Official data released on Wednesday showed that U.K. unemployment reached a four-year high of 4.7% in the second quarter.
This is largely a result of Prime Minister Keir Starmer's government increasing a U.K. business tax from April, the same month that the country became subject to U.S. President Donald Trump's 10% baseline tariff on most goods.
However, London and Washington reached an agreement in May to cut levies of more than 10% on certain U.K.-made items imported by the U.S., notably vehicles.
"A favorable trade agreement has enabled output to pick up again as June showed growth in all sectors, including manufacturing," said Danni Hewson, head of financial analysis at AJ Bell.
Despite the turnaround in June, exports of goods to the U.S. fell by 700 million pounds ($950 million) in the month to their lowest level since February 2022, the ONS added Thursday.
"The value of goods exports to the U.S. has remained relatively low since the introduction of tariffs in April," it noted.
Citing threats to growth from U.S. tariffs, the Bank of England (BoE) last week cut its key interest rate by a quarter point to 4%.
"The weak global economy will remain a drag on U.K. GDP growth for a while yet," Ruth Gregory, deputy chief U.K. economist at Capital Economics research group, said following Thursday's data.
"The full drag on business investment from April's tax rises has yet to be felt. And the ongoing speculation about further tax rises in the (U.K.) autumn budget will probably keep consumers in a cautious mood."
Streeter added that "evidence of a more resilient economy may mean that the Bank of England policymakers are that bit more reticent about cutting interest rates in the months to come."
