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UK economic growth is “subdued but not stalling”, according to economists at PwC, as they upgraded projections for the current year.

Experts at the accounting and financial services giant have said that UK gross domestic product (GDP) is now on track to grow by 1.3% in 2025.

It had previously pointed towards an increase of 1.1% for the year.

The new forecast was driven by a stronger than expected first half of the year, with growth of 0.7% in the first quarter and 0.3% in the second quarter.

PwC’s research indicated that growth was “flattered” by Government spending, with higher state consumption and investment in healthcare helping to support growth in the second quarter.

It suggested that household consumption moderated over the quarter, while investment fell as firms were impacted by economic uncertainty and rising costs.

Barret Kupelian, PwC UK chief economist, said consumer spending has been somewhat better than expected despite being broadly flat in recent months.

“Growth is subdued but not stalling,” he said.

“The UK economy continues to tread water, with GDP growth flatlining but avoiding outright contraction.

“Consumer spending has held up better than expected, although higher interest rates are now feeding through more clearly into investment and housing.”

PwC’s research indicated that a “lasting recovery will require household spending and private sector activity to pick up”.

It suggested that GDP is currently forecast to increase by 1.2% next year but could see this rise to as much as 1.6% if there is an increased shift from saving towards spending.

Mr Kupelian added: “”This month’s economic picture is a story of gradual change rather than dramatic shifts.

“Headline CPI has moved lower, helped by falling energy prices, but services inflation remains sticky.

“This suggests that the path back to target may be uneven, with wages and domestic costs playing an increasing role in shaping the outlook.”