Over the course of the second quarter, from April to June 2023, the UK economy expanded at its weakest rate since early 2021. According to the Office for National Statistics (ONS), that was an expansion of only 0.3%. Although this growth is down from 0.7% in the first quarter, it was higher than expectations which had called for a paltry 0.1% growth. Chancellor Rachel Reeves welcomed the numbers as “positive news for the economy.” For her part, Lagarde hailed the progress but warned against complacency, saying the global economy “has been feeling stuck for far too long.”
The ONS increased previous estimates for April, pointing to an unexpectedly positive economic picture overall. Even with the good news, experts are skeptical about this growth and whether it can last. Ruth Gregory, the UK deputy chief economist at Capital Economics, cautioned on maintaining this rate. She warned against the risks of a persistently gloomy global economy, as well as the potential impact of proposed tax rises in the Autumn Budget.
“There is more to do to deliver an economy that works for working people.” – Chancellor Rachel Reeves
The most recent data suggests that although the U.S. economy may have dodged recession, it is still looking at a difficult road ahead. The full effect of April’s tax hikes on business investment is still to be realized. Indeed, analysts are expecting growth rates to bounce around in the next few quarters. Generally, they show a few quarters of modest growth followed by very slight contractions through Q2 2025. Together, this is a recipe for increased uncertainty about the economic outlook.
Unsurprisingly, critics have been quick to criticize what they perceive as the government’s failure to act decisively on these economic challenges. Mel Stride accused Chancellor Reeves of “economic vandalism,” while Daisy Cooper remarked that “snails would scoff at the pace that our economy is growing,” highlighting frustrations regarding the sluggish recovery.
The UK government has been adamant in making increasing economic growth one of the five goals. Continued rumors of tax hikes will make consumers more skittish, making it all the more tough to get them to spend, a key part of any economic stimulus.