The UK Economy Slows Less Than Expected in Q2

  • Britain's economy slowed less than expected between April and June 2025 after a strong start to the year, despite the shock of U.S. trade tariffs and a weaker jobs market. Official figures published on Thursday, August 14, 2025, showed that after an unusually strong 0.7% expansion in the first three months of 2025, gross domestic product grew 0.3% in the second quarter.
  • The Office for National Statistics said British GDP fell 0.1% in April 2025 - a smaller decline than first thought - and dropped again in May 2025 before rising 0.4% in June 2025 with growth across services, industry and construction. Economists said much of the growth reflected higher public spending and businesses at home and abroad building up stocks of goods ahead of higher U.S. tariffs.
  • The overall year-to-date budget results showed a $1.629Tn deficit, up 7.0%, from the same period a year earlier. Receipts were up 6.0%, or $262Bn, to $4.347Tn, a record high for the 10-month period, while outlays grew 7%, or $374Bn, to $5.975Tn, also a 10-month record. That was above the 0.1% forecast by the Bank of England and a Reuters poll of economists.
  • Business investment fell by 4.0% from the first quarter and household spending growth was weak. "The continued reluctance of consumers to open their wallets is concerning," said Thomas Pugh, economist at accountants RSM UK. "We don't expect growth to pick up much from here as continued consumer caution, weaker global demand and tax increases all continue to drag."
  • Most economists think Reeves will have to raise taxes in her annual budget in October or November 2025 - potentially by tens of billions of pounds - as a subdued growth outlook and high borrowing costs have made her budget goals harder to reach. "The UK is walking a narrow path between resilience and stagnation. Policy uncertainty in the run-up to the Autumn Budget risks tipping the balance," said CBI lead economist Ben Jones.
  • Last week, the BoE forecast Britain's economy would grow 0.3% in the third quarter and 1.25% in 2025 as a whole. The strong growth in the first quarter reflected increased production to avoid U.S. tariffs and more property sales due to the imminent end of a tax break.

(Source: Reuters)