GDP slows to just 0.3% growth in second quarter – what it means for YOU
MONEY TALKS GDP slows to just 0.3% growth in second quarter – what it means for YOU
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THE UK's economy grew in the three months to June but slowed on the first quarter of the year.
The latest figures from the Office for National Statistics (ONS) reveal Gross Domestic Product (GDP) grew by 0.3% between April and June.
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The UK economy has grown but slowed compared to the start of the year
Credit: Getty
This is lower than the 0.7% recorded between January and March, but stronger than expected by analysts.
GDP grew in the second quarter of the year mostly due to the services and construction sectors.
It's worth bearing in mind these latest quarterly figures are estimations and are open to be revised at a later date.
Liz McKeown, director of economic statistics at the ONS, said: "Growth slowed in the second quarter after a strong start to the year.
"The economy was weak across April and May, with some activity having been brought forward to February and March ahead of Stamp Duty and tariff changes, but then recovered strongly in June.
"Across the second quarter as a whole growth was led by services, with computer programming, health and vehicle leasing growing.
"Construction also increased while production fell back slightly.
"Growth for the quarter was also boosted by updated source data for April, which while still showing a contraction, was better than initially estimated.
"Services also drove growth in June with scientific R&D, engineering and car sales all having a strong month.
"Within production, which recovered, manufacture of electronics performed especially well."
Understanding GDP and Its Impact on the Economy
The data today was largely expected by analysts to show the UK economy slowed to just 0.1% growth in the second quarter of 2025 after a strong start to the year.
Last Thursday, the Bank of England forecast second-quarter UK GDP growth of 0.1%, slowed from 0.7% in the first quarter.
Figures have already shown that GDP contracted by 0.3% in April and 0.1% in May.
Plus, figures on Tuesday showed the UK jobs market weakened again, but overall wage growth remains strong, prompting traders to trim their bets on the possibility of another Bank of England rate cut this year.
Separate figures published by the ONS today showed GDP grew by 0.4% in June.
Patrick O'Donnell, chief investment strategist at Omnis Investments, said: "It appears that the economy is weathering any uncertainty associated with tariffs and tax policy for now.
"The probability of a further cut from the BoE by the end of the year has reduced somewhat following their recent guidance and labour market data.
"The next signpost for the market will be next week's inflation report, where particular focus will be paid to the services component, given the historical correlation with wage inflation.
"We still expect a further cut from the BoE this year and the cycle to continue into 2026 but appreciate that there will be market volatility as data evolves between now and then."
What it means for your money
GDP measures the economic output of companies, individuals and Governments.
If it is rising steadily, but not too much, it's a sign of a healthy and prosperous economy.
This is because it usually means people are spending more, the Government gets more tax and businesses get more money which then means pay rises for workers.
When GDP is falling, it means the economy is shrinking which can be bad news for businesses and workers who face pay cuts or even losing their job.
The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.
This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.
If GDP is low, the BoE cuts its base rate in order to encourage people to spend and invest money.
If it is higher, the BoE may keep its base rate higher in order to keep inflation in check.
What is the base rate and how does it affect the economy?
NINE members of the Bank of England's Monetary Policy Committee meet eight times each year to set the base rate.
Any change to the Bank's rate can have wide-reaching consequences as it directly influences both: The cost that lenders charge people to borrow money
The amount of savings interest banks pay out to customers.
When the Bank of England lowers interest rates, consumers tend to increase spending.
This can directly affect the country's GDP and help steer the economy into growth and out of a recession.
In this scenario, the cost of borrowing is usually cheap, and the biggest winners here are first-time buyers and homeowners with mortgages.
But those with savings tend to lose out.
However, when more credit is available to consumers, demand can increase, and prices tend to rise.
And if the inflation rate rises substantially - the Bank of England might increase interest rates to bring prices back down.
When the cost of borrowing rises - consumers and businesses have less money to spend, and in theory, as demand for goods and services falls, so should prices.
The Bank of England is tasked with keeping inflation at 2%, and hiking interest rates is a way of trying to reach this target.
In this scenario, the losers are those with debt.
First-time buyers will lose out to cheaper mortgage rates, and those on tracker or standard variable rate mortgages are usually impacted by hikes to the base rate immediately.
Those on a fixed-rate deal tend to be safe if they fixed when interest rates were lower - but their bills could drastically increase when it's time to remortgage.
The cost of borrowing through loans, credit cards and overdrafts also increases when the base rate rises.
However, the winners in this scenario are those with money to save.
Banks tend to battle it out by offering market-leading saving rates when the base rate is high.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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