U.K. GDP grows by a better-than-expected 0.3% in the second quarter, in a boost to Chancellor Rachel Reeves. CNBC's Ritika Gupta joins "Squawk Box Europe" to break down the numbers.

London

The United Kingdom's latest GDP figures have outperformed expectations, providing a temporary reprieve for Chancellor Rachel Reeves. Preliminary data shows second quarter GDP rising by 1.2% year-on-year and 0.3% quarter-on-quarter, both above forecasted levels. Key sectors such as construction, manufacturing, and services contributed to the positive results, with services growing 1.5% year-on-year.

Despite the stronger-than-expected growth, business investment remains a concern, having declined 4% quarter-on-quarter. Analysts note that higher taxes and international uncertainties continue to weigh on investment decisions. Reports suggest the government is unlikely to introduce a wealth tax in the upcoming budget, but questions persist about the long-term outlook for the UK economy.

Respite for Reeves: UK GDP grows faster than expected

Right, this is Rachel Reeves in number 11 Downing Street now, okay. I'm just doing an impression of Rachel Reeves, I don't know if she's doing exactly that, but she's going something like this, she's going, ball out of the park. Because these GDP figures from the United Kingdom are way, way better than the fears, the doom, don't get me wrong, we're not like knocking it out of the park on a regular basis, but they are way better than had expected. Let me go through the data and we'll get some analysis from Ritika as well. UK second quarter preliminary GDP up 1.2%, the polls for up 1% year on year. The June figure, this is interesting, up 0.4% month on month versus up 0.1% expected. Second quarter GDP up 0.3% versus quarter one up 0.7%. But the poll was for only pretty much flatlining and the fear was that the vultures were gathering if this was going to be a negative figure. Construction is better than expected. Manufacturing is better than expected. Across the board, services, again, which is so key for the UK economy, up 1.5% year on year. The voters poll was up 1.2%. Business investment, that looks horrible. I will say that. Second quarter business investment down 4% quarter on quarter. UK second quarter business investment up 0.1%. But on the pure GDP figures, as I bring Ritika in to give us some brilliant analysis on this one as well, I would say that she's going to be very happy today at number 11 Downing Street. It allays fears just for now on that. But of course, this is this is the long game and there are real some grave concerns about the UK economy. Good morning to you. Good morning. Yeah, I think you're right. It's a small win for Rachel Reeves. These aren't fantastic numbers, but it's not negative. So I think what was expected that we would pretty much get flat. They were expecting that on the second quarter GDP, we'd get modest growth about 0.1%. So a beat there 0.3%. That is still down from the first quarter when we had that 0.7% growth. But remember that 0.7% from the first quarter was very much seen as anomaly that pull forward from the tariff effect and the expectation that we're going to get the tax hikes here domestically. Then also the focus we talked about the June month of a month figure. So that came in at 0.2%. It was expected to be roughly flat. So a bit of a rebound after we've had two months of negative contraction. So you're right. This is some positive news for the chance. I think she is going to spend this in a positive way, not as gloomy as was expected. But overall, we do still see it. But if I was Karen Cho, which I am on this one because I can tell she was in my brain on this one as well. You were so looking at that business investment story. Seriously, I think if you're the Chancellor, you've got to ask yourself, what is the impact here on the higher taxation? What is it doing in terms of demand and investment here? And of course, there are international factors at play. We know the tariff uncertainty has been impacting business, but the high cost from national insurance contributions to other tax burdens seems to be impacting the investment decisions. What is the Chancellor going to do about that? Because there's a massive feature of the economy. And I think that's a big question come autumn, because of course, we're expecting it's going to be a tax rising budget. Is she going to have to? She doesn't have really that many manoeuvres to pull. So if she's going to have to raise taxes, where do those taxes fall? And it could be that we do see employers bearing the brunt of more of those. So I think there has been very much a wait and see when it comes to investment, when it comes to hiring this summer in anticipation of autumn. We're going to revisit another story. I want to just tease this up as well, because we're going to talk very much about whether the non-doms are leaving, whether company directors are leaving, whether it's better than expected, worse than expected. A lot of stories on a daily basis about this coming up as well. Some of the most recent copy in the last 24 hours says it's not as bad as feared. I think it is still pretty bad as well. Are you getting any insight on this story? It's difficult because anecdotally, we hear it a lot. And then the figures have been some sort of murky figures coming out. Many of them are suggesting that we are getting billionaires, millionaires leaving to some of those jurisdictions where there aren't these hefty taxes. So that's something that's been interesting. We have heard Rachel, we've seen articles that she's not going to go ahead with this wealth tax, though she hasn't said it publicly. But there have been reports that we've read. So that could be something that was also very front of minds for those people who have been leaving, is whether we're going to get this wealth tax in place. But apparently, we're not going to get that in the autumn budget. All I can say is everyone I know is either talking about it or knows a lot of people who have left as well. And it's not just anecdotal as well. I have reams of people who are having this very, very conversation about Dubai, about Abu Dhabi, about Milan, about all kinds of places.

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