The British economy expanded by a lackluster 0.1% in August, according to the latest figures from the Office for National Statistics (ONS).
“Production grew by 0.4% in August 2025, whereas services showed no growth and construction fell by 0.3%,” the ONS noted. Economists polled by Reuters had expected month-on-month growth of 0.1%.
The ONS also revised its growth data for July, which initially showed the economy flatlining. It now assesses that the economy had shrunk by 0.1% in July, following a 0.4% expansion in June.
The slowdown in growth comes as no surprise, with economists forecasting a moderation in economic activity. Third-quarter GDP figures, due to be released in mid-November, will be closely watched for further signs of deceleration.
The economy grew by a better-than-expected 0.3% in the second quarter, down from 0.7% seen in the first quarter. The strong first-quarter performance was boosted by the front-loading of business activity ahead of U.S. trade tariffs in April.
“Some course correction is likely after an excellent start for the U.K. economy,” said Sanjay Raja, Deutsche Bank’s chief U.K. economist, in emailed comments this week. “Indeed, after a strong first half of 2025 momentum, we expect growth to shift to a lower gear in the second half [of the year]. We see quarterly GDP tracking around 0.2% quarter-on-quarter but there are downside risks brewing.”
Finance Minister Rachel Reeves is expected to announce tax rises and spending cuts that could dampen consumer spending, business investment, and ultimately, economic growth.
Economists at Goldman Sachs highlighted in their analysis on Tuesday that while there is a case for cutting interest rates, the Bank of England (BOE) is likely to wait for more progress on inflation before making further reductions. The BOE trimmed the benchmark interest rate to 4% in August.
“In particular, normalisation in measures of underlying services inflation—which strip out the noise related to volatile and regulated prices—has stalled in recent months,” Goldman Sachs noted. “Moreover, headline inflation is likely to remain close to 4% for the remainder of 2025, given upward pressure from food prices in particular.”
Goldman Sachs expects significant progress in services inflation during the first half of 2026 but believes the Monetary Policy Committee (MPC) “is likely to wait with more cuts until they see tangible progress in services inflation.”
https://www.cnbc.com/2025/10/16/uk-gdp-for-august-2025.html