The latest UK GDP figures have sparked mixed reactions from economists, with growth surpassing expectations for the three months to June but showing a significant slowdown from earlier in the year. Industry experts have shared their reaction to the news below.
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“Whether you are a cup half empty or a cup half full type of person will determine how you view this latest set of UK growth figures.
The economy has continued its positive trajectory and grew by more than had been expected in the three months to June, despite a challenging backdrop – not least from the government’s own actions on business taxation. But that growth has slowed significantly from the 0.7% charge at the start of the year and even the most charitable can’t consider the pace as anything other than sluggish, especially when you factor in population growth.
For Rachel Reeves today’s figures will provide a welcome boost as she draws up her Budget plans, with promises that she is looking for ways to go further and faster when it comes to stimulating the economy. The government put growth at the top of its agenda, so expansion in the construction sector will provide a glimmer of hope that at least some of its plans are beginning to bear fruit.
The slowdown had been anticipated as the threat of tariffs became reality in April, which spurred many manufacturers to front load production. Trump’s Liberation Day shock forced some businesses to temporarily halt lines, but a favourable trade agreement has enabled output to pick up again as June showed growth in all sectors including manufacturing.
Despite shaky consumer confidence, the service sector delivered the biggest boost to June’s figures. This was helped along by balmy temperatures which tempted people to visit beer gardens and ice cream parlours.
The question now is whether growth can be sustained in the face of speculation about tax rises in the autumn, which could further undermine flagging business sentiment.”
Derrick Dunne, CEO of YOU Asset Management, has commented on this morning’s GDP data:
“Finally, some good news for the beleaguered Chancellor. The latest round of GDP data appears to prove that the UK’s weakness may be fleeting rather than fundamental, impacted by one-off factors such as Trump tariffs and tax changes.
Nevertheless, both the Chancellor and the Bank of England still have tough challenges ahead. It will help Reeves’s sums ahead of the October budget, but she still has the challenge of balancing the UK’s wayward finances. She may struggle to raise taxes without denting this nascent economic recovery. Borrowing more or cutting spending are toxic to the bond market and Labour backbenchers respectively.
The Bank of England has to weigh still-buoyant wage growth with ongoing fragility in the broader economy. Inflationary pressures are still evident, making further interest rate cuts difficult, but the economy would welcome the boost rate cuts would provide. The next few months will see plenty of head-scratching for policymakers.
Nevertheless, there are reasons why the UK economy could sustain its recent strength. The impact of the flurry of trade deals – with the US, India and Europe in particular – has not yet shown up in the data. Wage growth should help keep the consumer economy alive, while shifts in planning regulation and other initiatives should revive the construction sector.
However, these will take time to come through. In the meantime, the UK is muddling through better than many expected.
Anyone who is unsure about how this could impact their personal finances should speak to a financial planner.”
David Morrison, Senior Market Analyst at FCA-regulated fintech and financial services provider, Trade Nation, comments:
“The UK GDP demonstrated its strength in Q2 with an unexpected increase of +0.3%, surpassing the +0.1% forecast by economists. Nonetheless, this marks a significant decline from the +0.7% seen in Q1, but a win is still a win for Sir Kier and his team. The recovery in June was particularly notable as the impact of Trump tariffs was managed, with the service sector taking the lead, along with an unexpected rise in construction. Overall, growth has slowed as the economy takes a pause, which is evident in manufacturing. Expectations for a rapid recovery in growth may be challenging as the job market shows signs of weakening, inflation remains persistent, and even though the BOE made cuts last week, it was done with a cautious approach. The pound sits just south of 1.36 as we speak against USD.”
