UK economic growth slows but beats forecasts
UK economic growth slowed between April and June but came in stronger than expected, according to official figures. The economy expanded by 0.3%, down from 0.7% in the first three months of the year, the Office for National Statistics (ONS) said.
The most significant contribution came from the services sector, while the construction industry also grew. The government has made economic growth a top priority, and the latest figure beats forecasts of 0.1%, which would have signalled near-stagnation.
Chancellor Rachel Reeves said the figures were welcome, but that there was 'still more to do' so that people across the country can feel the benefit of growth.
The economy performed better than expected in June. The ONS also revised its estimate for April upwards, stating the economy grew by 0.2% instead of contracting by 0.1% as previously thought. Experts suggested that the hot, dry weather helped the construction industry, which expanded by 1.6% in the three months to June. Growth in the services sector was driven by areas including software development and IT support. The economy was also boosted by vehicle leasing and health services, such as GP surgeries, hospitals, and care homes.
Market Reaction and Outlook đ
Compared to other members of the G7 – the world's richest nations – the UK economy grew fastest in the first three months of the year. When taken as a whole, the UK may have seen the fastest growth in the first half of 2025.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the economy's resilience could make the Bank of England more hesitant about cutting interest rates. "Policymakers may choose to wait until inflation returns to the Bank of England's 2% target," she said. The Bank raised its inflation forecast last week and now expects inflation to peak at 4% later this year before falling back to its target in 2027.
Ruth Gregory, deputy chief UK economist at Capital Economics, said it was unlikely the country 'will maintain this rate of growth' between July and September. "The poor global economy will continue to stifle UK growth for a long time," she said.
Persistent speculation about further tax rises in the Autumn Budget will likely keep consumers in a cautious mood. According to the ONS data, business investment fell by 0.4%, a sharp reversal from the 3.9% growth seen in the first quarter, while household spending also dipped.
Business and Political Reaction
Iain Hoskins, a Liverpool-based musician, said that while increased National Insurance contributions had added £10,000 to his costs, he was "feeling more optimistic than we have done for the past few years," largely due to the better weather and improved consumer confidence.
"We had a great early summer, whereas often that period can be a complete washout," he said. "Unexpected sunshine brought people out in droves. The fact that interest rates have decreased has really helped: more money has been put in people's pockets. That is fundamental."
"The economy has been stuck for far too long," the Chancellor said. "We're trying to get it out of the rut of the last few years, with anaemic growth, low income, and living standards falling backwards."
Mel Stride, the Conservative shadow chancellor, accused her of "economic vandalism," while Liberal Democrat Treasury spokeswoman Daisy Cooper quipped that "snails will scoff at the rate that our economy is growing."
James Smith, an economist at ING Bank, said the figure for the April-to-June period was 'not bad'. He noted that business in the first quarter was "boosted by companies moving goods to get ahead of US trade tariffs," as well as homebuyers rushing to complete before a change in stamp duty. "Those factors were always going to be a drag," he said. "The fact that we ended up with 0.3% growth in an environment of global uncertainty isn't a bad result."
