Rachel Reeves dealt another huge blow as GDP plunges UK economy into ‘serious trouble’ | Personal Finance | Finance

Growth in the UK economy slowed in the second quarter of this year amid pressure from tariff uncertainty and tax increases, new official figures show. The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.3% for the quarter after 0.7% growth in the first three months of the year.

While the figure was stronger than the 0.1% level widely expected by economists, the uptick only came due to increased activity in June, 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. Experts have warned that the UK’s economic growth is “sputtering along rather than firing on all cylinders”. Sam Kirk, managing director at Retford-based J-Flex Rubber Products said: “Rachel Reeves said growing the economy was her ‘number one priority’, yet GDP has crawled to just 0.3%. If that’s what counts as success in her book, we’re in serious trouble.

“For all the grand speeches and bold promises, Britain’s economy is barely moving.”

Harry Mills, director at London-based Oku Markets, said the figures are “evidence of a flat-lining economy”.

He said: “The UK’s second-quarter GDP growth was slightly better than forecast at 0.3% but nevertheless showed a sharp slowdown from the first quarter of this year. Analysts had predicted growth of just 0.1% in the three months to June after a bumper – and deceiving – Q1 performance of 0.7%, reflective of the temporary boost to output caused by a surge in exports to beat the April US tariff deadline.

“Whilst a beat to the forecast is ostensibly good, and I’m sure the Government will be screaming about this all day, the figure is evidence of a flat-lining economy.”

He added that, when coupled with the economy continuing to “lose momentum” into the third quarter, where leading indicators such as the July PMI surveys point to growth waning further as summer began, “it paints a far less rosy picture”.

Growth in the UK’s private sector slowed down in July, according to the S&P Global flash UK composite purchasing managers’ index (PMI). It reported a reading of 51, dipping from a nine-month high of 52 reported in June.

A score above 50.0 indicates that activity is growing, while a score below means it is contracting. This means the figures reflected continued growth but at a slower rate.

Meanwhile, in the construction sector, the latest S&P Global UK PMI showed a reading of 44.3 last month, down from 48.8 in June.

Chancellor Rachel Reeves said Thursday’s fresh data for April to June was “positive” but added that there is “more to do” to drive economic growth.

The slowdown in the economy could increase the likelihood of the Bank of England’s interest rate cuts, but it will also pose a challenge for Ms Reeves, who has hoped that accelerating growth can help support Government spending plans.

Sanjay Raja, Deutsche Bank’s chief UK economist, said: “Against wide expectations that the economy would just about stall in the second quarter, the UK economy surpassed our forecasts yet again. Underneath the surface, though, there’s much to be desired.

“The biggest contributor to GDP growth came via government spending. What disappointed? For starters, household spending – the growth engine of the UK economy nearly stalled, coming in at a paltry 0.1% quarter-on-quarter.”

Riz Malik, director at Southend-on-Sea-based R3 Wealth, said: “Does it feel like the economy is growing? An increasing number of people are telling me about their plans to leave the UK. If more skilled workers leave and unemployment rises, sustaining growth becomes far harder.

“Economic momentum relies on both a strong workforce and business confidence. Without the right talent in place, investment could slow and productivity suffer, putting the current pace of expansion at risk.”