Better-than-expected expansion
The UK economy grew 0.3% in the second quarter of 2025, beating forecasts of just 0.1%, according to the Office for National Statistics. The increase follows strong 0.7% growth in the first quarter, though momentum slowed in April and May before rebounding in June with a 0.4% monthly rise.
Services lead the recovery
Growth was driven largely by the services sector, including computer programming, health, and vehicle leasing. Construction also posted gains, while production fell slightly. In June, scientific research, engineering, and car sales delivered notable boosts. Electronics manufacturing showed particular strength, the ONS reported.
Lingering challenges ahead
Despite the positive data, analysts warn the rebound may not last. Economists cite a softening labor market, capacity constraints, and global headwinds as risks to sustained growth. Concerns over April’s tax hikes and speculation about further fiscal tightening could also weigh on consumer and business confidence. Forecasts for 2025 currently point to GDP growth of around 1.2%, though risks are tilted to the upside.
BOE policy in focus
The Bank of England recently cut its key interest rate by 25 basis points to 4%, citing cooling growth and a loosening labor market. Inflation remains elevated at 3.6% in June, complicating the policy outlook. With policymakers divided over whether to cut further or hold steady, attention now turns to how the economy performs in the coming months under shifting global and domestic conditions.
