Britain’s economy grew faster than previously estimated in the second quarter, offering Chancellor John Healey welcome evidence of resilience ahead of this month’s Budget.

The Office for National Statistics revised quarterly growth to 0.5% between April and June, up from its earlier estimate of 0.4%. The stronger reading was driven by improved services activity, higher household incomes and a sharp acceleration in business investment.

Investment provides a lift

Business investment rose by 5.2% in the quarter, according to the latest figures, a substantial improvement on the previously reported 0.8% increase. Real household disposable income per head also increased by 1.0%, the strongest quarterly rise since late 2024.

The figures suggest that the economy entered the second half of the year with more momentum than initially thought. Britain was also reported to have been the fastest-growing G7 economy during the first half of 2026, although the recovery remains uneven across sectors and households.

Budget implications

The revised data arrive less than four weeks before the government’s Budget, placing fresh focus on the Chancellor’s assessment of the public finances and the economy’s capacity to withstand higher borrowing costs.

Stronger growth could improve tax receipts and reduce pressure on the Treasury’s fiscal forecasts. However, the figures are backward-looking, while businesses continue to face elevated financing costs and uncertainty over forthcoming tax and spending decisions.

Markets have also remained sensitive to developments in the UK bond market. Thirty-year gilt yields recently moved above 6%, their highest level since 1998, before easing, increasing the cost of long-term government borrowing.

A mixed outlook

The data revision does not remove the risks facing the economy. Inflationary pressures, high borrowing costs and weak confidence in parts of the consumer and business sectors could constrain growth in the months ahead.

Manufacturing activity showed a modest improvement in September, with the sector’s purchasing managers’ index rising to 51.9 from 51.7 in August. But businesses continued to report noticeable strain in supply chains.

For the government, the figures provide a stronger starting point for the Budget but do not guarantee a sustained recovery. The immediate question is whether stronger investment and household incomes can continue to offset pressure from interest rates, taxes and rising household bills.