The UK GDP growth slowed to 0.3% in the three months to June 2025, according to official figures. This marks a slowdown from the 0.7% growth in the first quarter, as businesses faced higher costs and economic activity weakened.
Impact of Tariffs and Higher Business Costs
The economy’s slowdown is partly attributed to the impact of US President Donald Trump’s tariffs and the increased costs businesses faced. Employers were hit with higher costs due to more expensive national insurance contributions and a rise in minimum wages.
Caution from consumers also contributed to the lower growth reading. Many purchases were brought forward earlier in the year ahead of tariff changes and stamp duty revisions. At the same time, household costs rose in April due to higher energy, water, and council tax bills, which increased overall inflation.
Strong Performance in June
Despite the overall slowdown, GDP rose 0.4% in June, which came as a surprise to many observers. This positive performance could mean the UK economy was the strongest-performing in the G7 club for the first half of 2025, a title it also held in the first quarter.
The services sector drove growth, with computer programming, health, and vehicle leasing sectors performing well. Other sectors like scientific research, engineering, and car sales also showed strong performance in June.
Government Spending Boosts Growth
The biggest increase in expenditure came from government spending, particularly on health and public administration. Spending on vaccinations and defence played a key role in the growth of government-related expenditures.
Measuring Living Standards with GDP Per Capita
On a per-person basis, GDP per capita grew by 0.7% over the past year, reflecting better tracking of living standards. However, this growth is weaker than the 2010s average of 1.3% and far below the 2.5% growth seen in the pre-financial crisis period between 1993 and 2008.
Political Reactions
Chancellor Rachel Reeves described the figures as “positive” with a strong start to the year and continued growth in the second quarter. However, she emphasized that there is still work to be done to build an economy that works for working people.
She added, “We’re investing to rebuild our national infrastructure, cutting back on red tape to get Britain building again, and boosting the national minimum wage to make work pay.”
Meanwhile, Shadow Chancellor Mel Stride criticized the government’s approach, claiming it is “taxing the living daylights out of businesses.”
Conclusion
While the UK GDP growth slowed in the second quarter, the economy still showed resilience despite challenges like higher business costs and tariffs. The performance in June offers some hope for a more robust recovery in the second half of 2025.
