Rachel Reeves, the new Chancellor, has indicated that tax increases are still likely in her October 30 Budget, despite positive signs of economic growth in the second quarter of the year. The UK economy expanded by 0.6% in the three months to June, following 0.7% growth in the first quarter, according to the Office for National Statistics (ONS).

Despite this strong performance, Reeves emphasized that the government faces significant challenges, including a £22 billion shortfall in public finances and the legacy of low economic growth. As a result, the upcoming Budget is expected to include difficult fiscal decisions, including potential tax hikes and welfare adjustments. Reeves underscored the importance of economic growth, saying the government is making “tough decisions” to rebuild the country’s financial foundations.

The positive growth, which occurred even though the economy flatlined in June, was primarily driven by the services sector, particularly law firms, IT, and scientific research. Liz McKeown of the ONS noted that the economy has “grown strongly for two quarters,” reversing last year’s weaker performance.

Economists, such as Yael Selfin from KPMG and Jake Finney from PwC, expressed optimism about the economy’s recovery, with Finney suggesting that the UK is gradually “turning a corner” under the new government.