According to the Office for National Statistics (ONS), monthly real gross domestic product (GDP) is estimated to have grown by 0.4% in June following two consecutive months of falls of 0.1% in May and 0.3% in April, the latter of which was an unrevised decrease.
Real GDP is estimated to have experienced growth of 0.3% in Q2 this year compared to Q1. The ONS said the expansion in Q2 was largely driven by growth in the services sector during the period.
Monthly services, production and construction output all grew in June – by 0.3%, 0.7% and 0.3% respectively. For Q2 as a whole, services grew by 0.4% and construction grew by 1.2% compared to the previous quarter. However, the ONS said these were “partially offset by a fall in production of 0.3%”.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “The UK economy expanded by just 0.3% in the second quarter, a slowdown from the more robust figure of 0.7% recorded in Q1, as rising costs, a cooling labour market and global uncertainty – particularly around US President Trump’s tariff policies and geopolitical tensions in the Middle East – weighed on business and consumer sentiment.
“June’s positive GDP figure helped lift the quarterly average, offsetting declines in April and May, with growth driven by a strong performance in the production sector and a rise in demand for military-related products amid an escalation in geopolitical pressures.
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“The latest GDP data may deliver some encouragement to Chancellor Rachel Reeves as she pursues her growth agenda. However, the slowdown in the second quarter raises questions about whether current output levels are strong enough to prevent further tax hikes in the Autumn Budget. Recent U-turns on welfare and Winter Fuel Payments have added pressure to the public purse, with mounting speculation that Reeves may target inheritance tax gifting rules or gambling levies to raise revenue.
“For consumers, weaker growth in the second quarter is worrying. If earnings stagnate and redundancies ramp up – as suggested by the latest jobs data this week, with unemployment remaining at a four-year high of 4.7%, vacancy levels falling and wage growth easing – many households could face renewed financial strain.
“A softening labour market, stubbornly high inflation, slowing wage increases and a higher tax burden present a troublesome combination for household budgets. While five interest rate cuts since August last year have offered some relief, the latest 25 basis-point reduction to 4% may not be reflected in lower borrowing costs across the board as some lenders remain cautious about future rate cut expectations amid niggling inflationary pressures. With food prices continuing to surge, the Bank of England has signalled that interest rates may need to remain elevated for longer as it expects consumer price inflation to peak [at] 4% in September.
“This will deliver a blow to households, with many still grappling with the lingering effects of the cost-of-living crisis. Taking control of personal finances now is key – whether that means tackling high-interest debts, building up emergency savings or preparing for potential job losses. Long periods without an earned income can be financially devastating, which is why a proactive approach can help households weather any unexpected shocks.”
