Rachel Reeves in crisis as UK economy grows by just 0.3% | City & Business | Finance

UK GDP figures have showed sluggish growth of just 0.3% in the second quarter from April to June, dealing a blow to Chancellor Rachel Reeves as she tries to deliver on her economic promises. Ms Reeves has pledged to tackle Britain’s long-standing productivity problem in the autumn budget.

Investment in infrastructure and reform of the planning system will form the backbone of her plans to boost the economy’s productive capacity. However, the latest Office of National Statistics (ONS) data will be bitterly disappointing compared with the first quarter, which saw growth of 0.7%. Commenting afterward, she said: “Today’s economic figures are positive with a strong start to the year and continued growth in the second quarter.

“But there is more to do to deliver an economy that works for working people. “I know that the British economy has the key ingredients for success but has felt stuck for too long.”

She added: “That is why we’re investing to rebuild our national infrastructure, cutting back on red tape to get Britain building again and boosting the national minimum wage to make work pay.

“There’s more to do and today’s figures only fuel my ambition to deliver on our plan for change.”

Growth in June was also stronger than expected, bouncing back after two consecutive months of decline.

The month was boosted by a “strong” performance for scientific research and development, engineering and car sales.

Within the production sector, there was a strong growth in the manufacturing of electronics.

June’s 0.4% reading comes after the economy contracted by 0.1% in both April and May.

The ONS confirmed that April’s economic decline was weaker than expected after receiving more data, having originally estimated a drop of 0.3% for the month.

Sir Mel Stride MP, Shadow Chancellor of the Exchequer, said: “Any economic growth is welcome, but with business leaders saying that all indicators are flashing red, and key economists are warning that Rachel Reeves has created a £50 billion black hole in the public finances, Rachel Reeves’ economic vandalism is clear.

“Under Labour, we have already seen taxes hiked, inflation almost double, unemployment rise, and growth stagnate. Looming tax rises will only make things worse and working people will pay the price.”

ONS director of economic statistics Liz McKeown said: “Growth slowed in the second quarter after a strong start to the year.

“The economy was weak across April and May, with some activity having been brought forward to February and March ahead of stamp duty and tariff changes, but then recovered strongly in June.

“Across the second quarter as a whole, growth was led by services, with computer programming, health and vehicle leasing growing.”

One area which did see significant growth was the construction industry, which saw a 1.2% spike.

The Government’s Planning and Infrastructure Bill, now in the House of Lords, aims to cut red tape and shift power from councillors to expert officers.

Writing in The Guardian on Wednesday, Ms Reeves wrote: “If renewal is our mission and productivity is our challenge, then investment and reform are our tools.”

Labour’s second year in office will focus on “building a stronger economy for a renewed Britain”, she emphasised.

She added: “Working people across Britain are striving and grafting, but they haven’t had the tools they need for the job. They have not seen their incomes rise as a reward for their hard work.

“There is that sinking feeling that families and businesses across the country feel at the end of every month — that they are working hard, but getting nowhere.

“There is nothing progressive — nothing Labour — about an economy that is not productive and does not reward those who contribute.”

She added: “Since I became shadow chancellor and then Chancellor, I have known that breaking this cycle will require our sustained effort across many fronts.”

Ms Reeves said her tax decisions will be set out “responsibly” in the budget despite speculation about her plans.

In April, GDP fell 0.3%, the sharpest monthly drop since October 2023, after US tariffs imposed by President Donald Trump triggered a record slump in UK exports to America. Productivity was 0.2% lower in the first quarter of 2025 than a year earlier, the Office for National Statistics said.

In July, ministers were told to prioritise “productivity-enhancing opportunities” in government contracts, with Ms Reeves and Cabinet Office chief Pat McFadden saying public procurement must boost “British industry, jobs, skills, productivity.”