The UK economy lost momentum in the second quarter of 2025, expanding by just 0.3% between April and June, according to official figures published by the Office for National Statistics (ONS). The slowdown marks a sharp deceleration from the 0.7% growth recorded in the first quarter and has heightened concerns about the outlook for the remainder of the year.
While the latest quarterly estimate was unchanged, the ONS revised its assessment of earlier periods, suggesting the economy performed more strongly in late 2024 than initially reported. Annual GDP growth for 2024 remained at 1.1%, but quarterly data was adjusted: growth in Q1 was revised down from 0.9% to 0.8%, while Q2 was revised up from 0.5% to 0.6%, Q3 from flat to 0.2%, and Q4 from 0.1% to 0.2%.
“These new figures show the economy grew a little less strongly at the start of last year than initial estimates suggested, but performed better in later quarters,” said Liz McKeown, ONS director of economic statistics. “Quarterly growth rates for 2025 are unrevised.”
Despite modest growth, household disposable income improved slightly in the second quarter, rising 0.2% following a 0.9% fall in the first quarter. The rebound was supported by a £4.4 billion increase in wages and a £4 billion reduction in income tax liabilities linked to the 2023–24 tax year.
However, rather than boosting spending, households opted to save more of their income. The saving ratio rose to 10.7% from 10.5%, highlighting growing consumer caution. Spending growth remained flat, and consumer-facing services posted a slight contraction, even as the wider services sector expanded by 0.4%.
“The increase in the saving ratio suggests consumers turned more cautious in the second quarter,” said Thomas Pugh, chief economist at RSM UK. “The big question now is whether speculation about the Budget will undermine confidence further.”
The data also revealed uneven sectoral performance. Production output contracted by 0.8%, a steeper decline than the 0.3% initially estimated, while construction output rose by 1%, though this was revised down from 1.2%. Services, which account for the majority of economic activity, were unchanged at 0.4% growth.
Uncertain outlook for remainder of 2025
Economists warn that the second half of the year may bring further challenges. Rising inflation, slower wage growth, and the prospect of additional tax increases in the autumn Budget are expected to weigh on household spending and overall economic momentum.
“Growth is likely to remain sluggish,” said Matt Swannell, chief economic adviser at EY Item Club. “Alongside squeezed real income, further tax rises at the autumn Budget look almost inevitable.”
With interest rate cuts appearing less likely in 2025, analysts caution that the economy faces a difficult environment in the months ahead, as households and businesses brace for tighter fiscal conditions and ongoing uncertainty.
