Economic activity in the UK slowed in the second quarter of 2025, according to a preliminary estimate. Trade tensions brought forward a significant amount of trade activity in the first quarter, with consumers and businesses trying to get ahead of tariffs. The UK was one of the first to negotiate a trade deal with the US, but it still faces a 10% tariff on most goods exported to the US. Trade tensions continue to raise uncertainty about the domestic and global economies, which helped soften consumer activity in the quarter.

• Gross domestic product in the UK rose by 0.3% over the second quarter of 2025. This marked a slowdown from the first quarter but exceeded economists’ expectations of 0.1% growth, based on a survey from Bloomberg.
• Helping growth over the quarter was an increase in government spending. The government increased spending on health care and defence, which supported overall growth. Second-quarter growth also benefited from relatively strong services sector activity.
• Consumer spending slowed over the quarter, while business investment dropped. Despite a trade deal, economic uncertainty persists, which is weighing on consumer and business confidence. The results suggest consumers and businesses remain relatively cautious.
• In Europe, a second estimate showed the European economy expanded by 0.1% over the second quarter, which was the weakest pace of growth since the fourth quarter of 2023. Europe just reached a trade deal with the US.

The threat of tariffs early this year has resulted in a significant shift in trade activity over the first two quarters, which has had an impact on economic growth rates. Consumer spending was tepid over the quarter, concerning economists. The UK economy appears to be on the path for relatively muted growth in 2025. The Bank of England lowered its policy interest rate to 4.00% in August, and might lower rates again depending on the path of inflation and the labour market.

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