Preliminary data from the Office for National Statistics (ONS) revealed Thursday that the U.K. economy posted stronger-than-anticipated growth of 0.3% in the second quarter. This outpaced the 0.1% uptick expected by economists surveyed by Reuters, though it remained below the robust 0.7% expansion recorded in the previous quarter.
On a monthly basis, GDP rose 0.4% in June, rebounding from a 0.1% contraction in May, as businesses continued to grapple with the lingering effects of U.S. tariffs and broader economic uncertainties.
ONS director of economic statistics, Liz McKeown, noted weakness earlier in the quarter, which she attributed in part to activity being pulled forward into February and March ahead of changes to stamp duty—a levy imposed on the purchase of real estate—and tariff rules.
Nevertheless, McKeown said, the economy “recovered strongly” in June, with services leading the upturn, particularly in computer programming, healthcare, and vehicle leasing. Construction activity also posted gains, while the production sector saw a slight pullback. Revised figures for April, though still negative, were less severe than initially estimated, providing an additional boost to the quarterly performance.
The report arrives days after the Bank of England (BOE) reduced its benchmark interest rate from 4.25% to 4%, as the central bank tries to balance persistent inflation with flagging growth and a cooling labor market.
In its latest statement, the BOE’s Monetary Policy Committee reiterated its commitment to taming inflation and returning it to the 2% target over the medium term. Policymakers highlighted subdued underlying growth and a gradual softening in labor market conditions, while also acknowledging ongoing risks from domestic and geopolitical factors, despite some easing of trade policy uncertainty following the U.K.’s agreement with the U.S. on a 10% tariff regime.
The decision to cut rates was reached after a closely divided committee vote: four members supported holding rates steady, four were in favor of a cut, and a single member pushed for a deeper, 50-basis-point reduction. Ultimately, a second ballot delivered a majority in favor of a 25-basis-point cut.
