UK Economy Slows Less Than Expected, Offering a Breather for Reeves

The UK economy grew by 0.3% in the second quarter of 2025—down from a robust 0.7% in the first quarter, yet still outperforming the 0.1% that economists and the Bank of England had forecast. This slightly stronger-than-expected growth offers some relief for Chancellor Rachel Reeves amid the twin pressures of U.S. tariffs and a cooling jobs market.

The rebound came after a modest dip of 0.1% in May, with a 0.4% boost in June largely driven by gains in services, industrial activity, and construction. Despite the drop in investment—down roughly 4% for the quarter—and a lingering sense of fragility, annual growth clocked in at 1.2%, surpassing projections for 1.0%. Among G7 countries, the UK tied with France for second place in growth performance.

However, optimism is tempered by caution. Analysts warn that the prior quarter’s strong performance may be a one-off, noting waning business confidence, weaker investment trends, and the broader risk of rising cost pressures. Still, the data provides Reeves with some fiscal breathing room as she considers the contours of the upcoming autumn budget.