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UK growth slows sharply to 0.3% in second quarter as households turn cautious

by September 30, 2025
September 30, 2025
UK growth slows sharply to 0.3% in second quarter as households turn cautious

The UK economy slowed sharply in the second quarter of 2025, with official figures confirming growth of just 0.3% between April and June, a marked deceleration from the 0.7% expansion in the first quarter.

Data from the Office for National Statistics (ONS) showed that while the latest quarterly figure was unrevised, revisions to earlier estimates suggest growth in much of 2024 was stronger than first thought, even as momentum weakened heading into this year.

The ONS said annual GDP growth for 2024 remained unchanged at 1.1%, but quarterly revisions painted a more nuanced picture. First-quarter growth last year was revised down from 0.9% to 0.8%, while subsequent quarters were adjusted upwards: Q2 from 0.5% to 0.6%, Q3 from flat to 0.2% growth, and Q4 from 0.1% to 0.2%.

Liz McKeown, ONS director of economic statistics, said: “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. Quarterly growth rates for 2025 are unrevised.”

Household disposable income per person rose 0.2% in Q2, rebounding from a 0.9% fall in Q1, driven by a £4.4 billion rise in wages and a £4 billion fall in income tax liabilities related to the 2023-24 tax year.

However, households chose to save more of that income, with the saving ratio rising to 10.7% from 10.5%, signalling greater consumer caution. Spending growth remained flat, while consumer-facing services saw a slight fall in output despite overall services growth of 0.4%.

Thomas Pugh, chief economist at RSM UK, said: “The increase in the saving ratio suggests consumers turned more cautious in the second quarter. The big question now is whether speculation about the Budget will undermine confidence further.”

The ONS figures revealed a more subdued picture in some industries. Production output fell by 0.8%, a deeper contraction than the 0.3% initially reported. Construction output grew by 1%, though this was revised down from 1.2%. Services, the largest sector of the economy, expanded by an unrevised 0.4%.

Outlook for second half of 2025

Economists remain cautious about prospects for the remainder of the year. Rising inflation, slowing wage growth and expectations of further tax rises in the autumn Budget are likely to weigh on activity.

Matt Swannell, chief economic adviser at EY Item Club, said growth was likely to remain “sluggish”: “Alongside squeezed real income, further tax rises at the autumn Budget look almost inevitable.”

With interest rate cuts now seen as less likely in 2025, analysts suggest the UK economy faces a tougher environment in the second half of the year, with households tightening spending as uncertainty over fiscal policy builds.

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UK growth slows sharply to 0.3% in second quarter as households turn cautious

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