UK growth revised up to 0.5%: What drove the stronger figures?

Stronger services growth drove the upward revision to second-quarter GDP growth, as the UK battles high borrowing costs, inflationary pressures and a cooling labour market.

Britain's economy grew more than initially estimated in the second quarter, revised data from the country's statistics agency, the Office for National Statistics (ONS), showed on Wednesday, offering a boost to Prime Minister Andy Burnham ahead of next month's annual budget update.

The UK's quarterly GDP growth came in at 0.5% in the second quarter, revised up slightly from the 0.4% reported previously.

The figure still marked a slowdown from the 0.6% expansion recorded in the first quarter.

The upward revision was mainly driven by stronger figures for professional, scientific and technical services, following updated business survey data. Services output grew by 0.6%, compared with the previously estimated 0.5%.

"Stronger services growth in the latest quarter means the economy is now slightly larger than previously estimated," ONS director of economic statistics Liz McKeown said in a statement.

Advertising, scientific research, legal services and computer programming were among the main drivers of services growth. Construction also expanded by 0.8%, while production output fell by 0.1%.

Household finances improved as real household disposable income per head rose by 1.0%, after falling by 0.8% in the first quarter.

"Growth has come in marginally better than initially expected, but it remains difficult to come by as households and businesses contend with high borrowing costs, inflationary pressures and a cooling labour market," said Richard Carter, head of fixed interest research at Quilter Cheviot.

He noted that since the second quarter, "the outlook has become more uncertain" following a recent surge in energy prices and borrowing costs.

The UK economy is facing increasing pressure as inflation has been rising and government bond yields have reached multi-decade highs this month.

Chancellor John Healey, who will unveil the budget on 28 October, has pledged to maintain strict fiscal discipline.

According to Carter, tax rises or similar measures in the budget could undermine the emerging positive trends supporting economic growth.

"Ultimately, the Budget will be the first real test of whether the Chancellor can square fiscal discipline with the need to support growth," Carter said, adding that "markets will be looking for a credible plan, and are unlikely to give the government much benefit of the doubt".