United Kingdom's economy expands by a robust 0.3% during the second quarter, exceeding initial forecasts.
The Office for National Statistics has announced the official figures for Britain's economic growth, revealing a faster-than-expected expansion in the second quarter of 2025. Finance Minister Rachel Reeves received a boost from this growth, with the British GDP rising by 0.4% in June alone.
The UK economy grew by 0.3% in Q2 2025, albeit slower than the 0.7% growth in Q1. This translates to an annual growth rate of 1.2%, compared to Q2 2024. Various forecasters project UK GDP growth to be around 1.0% to 1.2% for the full year 2025, with growth expected to remain subdued but positive in the second half of the year.
The EY ITEM Club has upgraded its 2025 GDP forecast to 1.0%, noting that uncertainty in global trade, tightening fiscal policy, and a weakening labour market will weigh on momentum. The International Monetary Fund (IMF) projects 1.2% growth in 2025, supported by monetary easing, improved private consumption, and public spending, but highlights risks from global trade tensions and inflation pressures. The Conference Board also expects 1.2% UK GDP growth in 2025, but flags weakening consumer expectations, fewer weekly working hours, and weaker housing sales as factors moderating growth in H2 2025.
Global trade uncertainty, notably from US tariffs and broader geopolitical tensions, continues to pose downside risks by disrupting exports and dampening business investment. Despite a strong start early in the year, it is unlikely that this pace will be sustained.
Domestic employment factors show mixed signals. While unemployment claimants have declined, weaker labour market conditions and reduced working hours (partly linked to weather effects) are noted, contributing to subdued economic momentum.
Reeves highlighted that British economic growth in the first quarter of 2025 was the fastest among the Group of Seven large advanced economies. The rise in output in June was due to strong growth across services, industrial output, and construction. The overall output in the second quarter was up 1.2% from the same period last year, higher than the median forecast from economists for 1.0% growth in the second quarter.
However, the outlook for the second half of 2025 is more subdued, according to Reeves. Britain is facing headwinds from ongoing global trade uncertainty due to increased US import tariffs. The slowdown in hiring at home, partly due to higher employment taxes and a big increase in the minimum wage, is also a concern.
Despite these challenges, the economy grew by 0.7% in the first three months of 2025, and the growth in the second quarter was faster than the expected 0.1% growth forecast by economists and the Bank of England. Sterling rose slightly against the dollar after the data was released. The International Monetary Fund forecasts Britain's economy would grow 1.2% this year and 1.4% in 2026.
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