Household incomes expanded at a stronger rate than initially reported during the opening half of the year, according to updated figures from the Office for National Statistics. The revision comes as the UK economy demonstrated durability following the outbreak of Middle East conflict more than seven months prior, providing a timely boost for Chancellor John Healey ahead of his inaugural budget announcement.
Real household disposable income per head increased by 1.1% between January and June, surpassing earlier estimates. The ONS confirmed that gross domestic product rose by 0.5% in the second quarter rather than the previously reported 0.4%, matching the growth rate achieved by the United States over the same six-month period. First-quarter expansion had reached 0.6%.
According to official economic data, year-on-year GDP growth in the second quarter was revised upward to 1.4% from an initial estimate of 1.2%. The ONS notes that real household disposable income adjusts household earnings for inflation and reflects purchasing power after taxes and deductions. In the second quarter, this measure reached £6,577 per head, reversing a 0.8% contraction recorded in the first quarter.
The stronger economic performance reflects gains across multiple sectors. Services output expanded by 0.6% in the second quarter, revised upward from an initial 0.5%, while construction output rose 0.8%. However, government spending declined by 0.5% during the quarter, with reduced education activity following school closures during June's heatwave cited as a contributing factor.
Households directed part of their income gains toward savings. The savings rate climbed from 8.6% in the first quarter to 8.8% in the three months ending June. Businesses maintained spending momentum, with investment rising 1.8% in the second quarter and standing 5.2% higher than the equivalent period a year earlier.
What drove the upward revision?
Stronger performance in services and rising household consumption bolstered the overall growth figure. Kathleen Brooks, research director at XTB, highlighted that the UK economy's service-based structure typically supports such patterns. She noted that
stronger services growth and rising household spending boosted the figure. This is fairly typical of the UK economy, which is service based, the real surprise was the strength of business investment and an improvement in the trade figures, which showed a boost in exports.
Analysts attributed some confidence gains to political developments. The Makerfield byelection announced in May cleared the path for a change in leadership, with some market observers suggesting this shift may have contributed to improved sentiment.
How did markets respond?
Financial markets reacted positively to the revised data. Currency traders speculated that robust growth might prompt the Bank of England to maintain or increase interest rates to prevent the economy from overheating, particularly given inflation at 3.1% remains above the central bank's 2% target.
Sterling reached a six-week peak against the euro and gained 0.4% against the US dollar, hitting a one-week high of $1.3292. Against the euro, the pound touched its strongest level since mid-August, with the euro declining nearly 0.3% to 85.43p.
UK government bond yields, which reflect borrowing costs, eased following the economic data and lower global oil prices. Two-year yields fell 0.05 of a percentage point to 4.86%, while 10-year yields dropped four basis points to 5.356% on Wednesday.
Thomas Watts, a fund manager at the private bank Julius Baer, characterised the figures as
yet more positive news for the new administrationfollowing the transition that began in February.
What about the broader economic outlook?
Despite the positive revision for the second quarter, the ONS has adjusted its full-year 2025 growth forecast downward to 1.2%, from a previous estimate of 1.3%. This reflects broader economic headwinds even as quarterly performance has improved.
Oil and gas prices have remained volatile since the Middle East conflict began. Following a ceasefire in summer, traders lost confidence in peace negotiations, pushing Brent crude above $100 per barrel, though prices have moderated in recent sessions.
What happens next?
Chancellor John Healey is scheduled to deliver his first Budget on Wednesday 28 October 2026. The upgraded growth figures and stronger household income data provide a more favourable backdrop for fiscal announcements, though the downward revision to full-year forecasts suggests economic momentum may face headwinds in coming quarters.
Key Facts:
- UK GDP growth revised to 0.5% in Q2 2026, up from initial estimate of 0.4%
- Real household disposable income rose 1.1% in the first half of 2026, with per-head income reaching £6,577 in Q2
- Year-on-year GDP growth in Q2 revised to 1.4%, up from 1.2% initially reported
- Business investment increased 1.8% in Q2 and stands 5.2% higher than a year earlier
- Full-year 2025 growth forecast lowered to 1.2% from 1.3%
