The UK economy experienced a continued slowdown during the second quarter of 2025, with official figures showing an unchanged growth rate of 0.3% between April and June. This performance marks a significant deceleration from the 0.7% expansion observed in the first quarter of the year. The Office for National Statistics (ONS) maintained its initial estimate for the second quarter while revising the growth figures for 2024. Although the overall annual growth rate for 2024 remained at 1.1%, the first quarter’s growth was adjusted down to 0.8%, while improvements were seen in subsequent quarters.
A notable recovery in household disposable income was recorded in the latest quarter, with a 0.2% increase, following a 0.9% decline in the previous quarter. This rise was primarily attributed to a £4.4 billion increase in wages, predominantly within the private sector, along with a £4 billion reduction in taxes on income, linked to the 2023-24 tax year.
Liz McKeown, the ONS director of economic statistics, acknowledged the somewhat uneven growth pattern observed in 2024. She noted minimal consumer spending growth and a slight decline in output for consumer-facing services despite overall growth in services.
The household saving ratio showed an increase, climbing to 10.7% from 10.5% in the previous quarter, indicating a trend towards more cautious consumer behavior. Chief economist at RSM UK, Thomas Pugh, remarked that this increase in savings suggests consumers have become more circumspect, potentially influenced by speculation surrounding the upcoming Budget.
Looking ahead, the outlook for growth remains challenging amid increasing inflationary pressures and slowing wage growth, with limited prospects for further interest rate cuts in 2025. The production sector experienced a greater-than-anticipated decline, while construction output growth was revised downwards. Nevertheless, services output growth remained steady at 0.4%.
Matt Swannell, chief economic adviser at the EY Item Club, predicted sluggish growth in the coming quarters, compounded by anticipated tax increases in the autumn Budget. In such a climate, consumers and businesses alike may face continued economic uncertainties, highlighting the intricate balance of fiscal policies and monetary conditions in the UK’s ongoing economic narrative.