Home » Rachel Reeves warns of tax rises despite best growth in G7

Rachel Reeves warns of tax rises despite best growth in G7

Rachel Reeves warns of tax rises despite best growth in G7

Ms Reeves has already warned of “tough decisions” in her maiden Budget this autumn, including on welfare.

“If you can work, you should work,” she said after official figures showed worklessness in Britain rose to its highest level in more than a decade.

The country’s strong economic performance was achieved despite the economy flatlining in June. Yael Selfin, of KPMG, described it as “another gangbusters quarter”.

Thursday’s figures mean the economy continued to outperform France, Germany and Italy in the second quarter of 2024, though economists said some of the bounceback was because Britain fell into a mild recession at the end of 2023.

Germany, Europe’s biggest economy, shrank 0.1pc in the three months to June, while the French economy grew 0.3pc and Italy expanded by 0.2pc. The wider EU grew 0.3pc.

Liz McKeown, director of economic statistics at the ONS, said the second quarter growth was led by Britain’s dominant services sector, with activity at law firms, IT businesses and scientific research driving the expansion.

She said the economy had now “grown strongly for two quarters, following the weakness we saw in the second half of last year”.

By contrast, Germany continues to teeter on the brink of recession, with declining investment and persistent weakness in manufacturing following Russia’s invasion of Ukraine damaging consumer sentiment.

Economists agreed that Ms Reeves had inherited a buoyant economy.

Jake Finney, an economist at PwC, said: “The latest growth statistics provide more evidence that the economy is gradually turning a corner as the new Government takes office.”

However, Britain’s growth has also been flattered by surging immigration.

The figures showed the economy grew at half the pace when adjusted for population size, with GDP per head rising 0.3pc over the quarter. This is slower than growth per head in the US but this builds on a strong 0.5pc expansion in the first three months of the year.