UK Economic Outlook: August 2025

ONS have released their latest quarterly estimate of gross domestic product (GDP) for April to June 2025. This reveals that:

• The UK economy grew by 0.3% in Q2 (April–June), outperforming forecasts of 0.1%, but below the 0.7% recorded in Q1 (January-March).

• This is an increase of 1.2% compared with Q2 last year, 2024.

• Monthly momentum was solid, with June alone seeing a 0.4% GDP gain.

The economy is showing resilience amid global trade pressures with Trump tariffs causing a three-year low in US goods exports, slumping by 13.5% in the second quarter compared with the same period a year earlier - the lowest UK exports to the US since the coronavirus pandemic.

Growth has been driven by performance in Services and Construction:

• Services grew by 0.4%, led by computer programming (+4.1%), health, and consultancy.

• Construction posted 1.2% growth, particularly in infrastructure projects.

• Production fell by 0.3%, reflecting broader industrial softness.

• Nominal GDP rose by 0.8% in Q2, largely driven by increases in wage growth.

Forecasts and economic projections remain cautious:

• The IMF slightly upgraded its UK growth forecast to 1.2% in 2025.

• The OECD projects 1.3% growth in 2025, slowing to 1.0% in 2026.

• EY ITEM Club sees subdued activity ahead, expecting 0.9% growth in 2025, rising to 1.5% by 2027.(EY)

The higher than expected growth may mean the Bank of England holds off on cutting interest rates until next year, according to some economists.

The regional context

While no recent region-specific updates are available in the latest economic releases, the East of England remains a substantial economic contributor, with GDP output higher than several other English regions but below London and the South East.

Recent productivity data (2023) shows the region remains below the UK average in output per hour worked.

The East of England likely benefited from the services and construction rebound, especially in urban centres like Cambridge, Norwich, and Ipswich.

But the regional performance may be dragged down by weak production, mirroring the national trend.

Structural challenges—below-average productivity and industrial activity—suggest the region needs targeted support to sustain growth.

Forecast data from EY’s UK Regional Economic Forecast indicates that the East of England is projected to grow at an average of 1.7% between 2025 and 2028, matching London and exceeding the UK-wide average of 1.6%. Growth is expected to be supported by strengths in skills-rich sectors, consumer spending, construction, and R&D.