UK gross domestic product (GDP) continued to increase in the second quarter of 2025, although growth has slowed from the first quarter of the year.
Figures from the Office for National Statistics show GDP increased by 0.3 percent in April to June 2025, following an increase of 0.7 percent in January to March 2025.
Year on year, GDP is up 1.2 percent in Q2, compared with the same quarter in 2024,
Growth in Q2 2025 was driven by increases of 0.4 percent in services and 1.2 percent in construction; while the production sector fell by 0.3 percent.
ONS estimated that real GDP per head of population is estimated to have grown by 0.2 percent in the latest quarter and is up 0.7 percent compared with the same three months in 2024.
A ‘flash estimate’ of labour productivity for Q2 2025, based on the gross value added (GVA), shows output per hour worked was lower (negative 0.8 percent) than in the same three months in 2024. ONS said that this is because hours worked increased more than GVA.
ONS also said output per hour worked was 1.5 percent above pre-pandemic levels (2019 average) in Quarter 2 2025. This increase was due to an increase in GVA of 5.1 percent and an increase in hours worked by 3.5 percent over the period.
Think tank IPPR warned that the Office for Budget Responsibility (OBR) is under pressure to downgrade its productivity forecast. But this would be premature, IPPR said.
Carsten Jung, associate director for economic policy at IPPR, said: “Today’s productivity data show that the UK economy still faces challenges. But, all forecasters agree that productivity will rebound — the real question is by how much.”
“There is growing pressure on the OBR to downgrade its productivity growth forecast. Some of the larger numbers floated would have close to austerity-level implications for the UK.
“The OBR should resist making such a change now. Interpreting the UK’s productivity statistics at the moment is like navigating through fog — the uncertainties are vast. There are, in fact, some grounds for optimism about a recovery.
“By holding the line this autumn, the OBR can avoid triggering damaging fiscal tightening and give itself time to act when the outlook becomes clearer.”
An analysis by IPPR said economists are pressuring the OBR to cut its productivity forecast in this autumn’s outlook, citing years of weak performance. The fiscal impact could range from negligible to a £44 billion hit to the public finances, all from changing a highly uncertain forecast, it said.
The think tank said the case for a downgrade “is not strong enough” because the ONS data is broadly in line with the OBR’s expectations, and does not contradict them. It also pointed to the Bank of England’s upgraded forecast and the “exceptional uncertainty” about recent productivity figures and the economy’s recovery path.
Commenting on the GDP figures, Scottish Friendly savings expert Jill Mackay said they signal economic momentum.
“The weather is hotting up in many places across the UK, and so, it seems, is the UK economy, with a surprisingly strong reading for UK GDP. It reverses the recent run of weaker data and suggests it may have been caused by one-off factors such as tariffs and changes to stamp duty.
“It will be a relief for the chancellor looking ahead to the October budget, making the sums a little easier. Nevertheless, options for balancing the books still look limited: raise taxes too far and it could send the economy backwards again, raise borrowing and bond yields could spike and spending cuts could face another backbench revolt.”
But Mackay said there are reasons why UK growth could be sustained. “Wage growth is still strong, which is giving households more spending power. Equally, the UK may start to reap the benefits of recent trade deals over the coming months, which may fuel growth. The recent rate cut could also generate marginal improvements in the economic outlook.
“The one down side is inflation, which is also running as hot as the weather. Ultimately, households should try and make hay while the sun is still shining, building a financial cushion. This is likely to be the greatest defence if the economy turns cold again.”
Lindsay James, investment strategist at Quilter, said that the encouraging growth seen in the first quarter was “somewhat of a mirage and unlikely to be repeated anytime soon”.
“GDP growth in the second quarter has dropped to 0.3 percent, and the UK appears to be stuck back where it was – anaemic growth with little sign of improvement. Although today’s GDP data is slightly better than expected and June’s growth came in at 0.4 percent, figures released earlier this week highlight where a lot of the issues lie. The labour market is weakening, the government appears to be planning for additional tax hikes in the Autumn and global factors make business planning difficult.
“None of these issues carry easy fixes and there are very few short-term solutions. With global growth set to slow at the same time as this slowdown in the UK, the picture is only becoming more challenging. Investors too continue to be fairly pessimistic on UK growth despite that stellar first quarter. In our own survey of global fund managers, expectations for real GDP growth in the UK for 2025 sit at 0.9 percent, suggesting that very little growth will be eked out in the second half of this year.
“There do remain some bright spots, however. Production and construction have bounced back after a poor couple of months, while consumers are benefitting from wage growth continuing to outstrip inflation, providing a little bit of ballast amongst the general population’s finances.
“Furthermore, a weakening economy and struggling labour market should give the Bank of England enough cover to lower interest rates further, despite inflation continuing to be a thorn in its side. Whether this is enough to boost consumer and business confidence remains to be seen – particularly given the tax pain being foreshadowed for later this year.”
