The latest UK GDP figures present a “half-full or half-empty” scenario. Between April and June, the economy grew by 0.3%, slower than the 0.7% growth seen at the start of the year. However, this is still better than expected, as forecasts had predicted near stagnation. Stronger-than-anticipated June data and an upward revision of April’s performance add to the positive side of the picture.
From a monthly perspective, the numbers are encouraging, with growth driven by the service sector. On a quarterly basis, growth remains modest. But looking at the first half of the year as a whole, the UK has recorded solid growth compared to other major economies. This could mean the government’s claim of having the fastest-growing G7 economy still holds for the first half of the year, pending Japan’s final data, despite earlier doubts.
Some of the first quarter’s strong numbers were influenced by one-off factors, like shifting exports to the US earlier to avoid potential tariffs and housing transactions ahead of stamp duty changes. When combined, the first two quarters show a total 1% growth — outperforming other advanced economies during a time of significant global uncertainty, oil price concerns, tax rises, and political instability.
Despite the positive data, consumer confidence remains low. High savings rates, similar to pandemic levels, suggest people are cautious about spending due to ongoing fears of tax increases. Sectors like retail and hospitality, heavily impacted by government policies, have been slow to recover and are offering fewer job opportunities, especially for young people. Meanwhile, industries like IT are showing strong performance.
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The quarter’s growth was also held back by a sharp drop in car exports to the US, which should rebound following the new UK-US trade deal. Improved trade relations with the EU and India could further support the economy. Slow but steady growth is anticipated in the coming months, but the real question is whether consumers and businesses will gain enough confidence to boost spending and investment.