Infographic showcasing month-on-month growth of UK's GDP and sector performance.
United Kingdom, August 14, 2025
The UK economy showcased surprising growth in June, with a month-on-month increase of 0.4%, exceeding economists’ expectations. The services and construction sectors drove this progress, marking a significant positive shift. However, challenges remain in production, while concerns about potential economic downturns loom. The unexpected growth could impact monetary policy decisions moving forward, potentially affecting interest rates and tax policies. Despite the positive GDP report, the FTSE 100 showed no significant gains, indicating lingering market uncertainties.
The UK economy demonstrated a surprising resilience with a month-on-month growth of 0.4% in June 2025. This performance outpaced expectations within economic circles, where many analysts had predicted only a modest growth of 0.1% for the quarter. Overall, the economy achieved a quarter-on-quarter increase of 0.3% during the second quarter of the year, signaling a positive turn from the first quarter’s growth of 0.7%.
The notable improvements in the economy were primarily driven by robust performances in both the services sector and the construction sector. The services sector expanded by 0.4% while the construction sector outperformed with an impressive 1.2% growth. This positive trend is particularly significant as it marks a turning point for the hotel and restaurant industries, which reported their first positive growth in several years at 2.4% quarter-on-quarter.
Despite the encouraging figures, some areas of the economy remain under pressure. Production output, which includes manufacturing, saw a decline during the same period. Moreover, concerns regarding potential economic downturns loom ahead, especially with the ongoing uncertainties stemming from US tariffs and domestic tax hikes.
Real GDP per head experienced a minor increase of 0.2% in the latest quarter, representing a year-on-year growth of 0.7%. Analysts suggest that this unexpected boost in economic output could impact monetary policy decisions, potentially delaying any further interest rate cuts by the Bank of England until next year.
With the Office for Budget Responsibility taking note of these developments, there is a growing belief that productivity recovery may be on the horizon. As firms have been able to maintain output levels while cutting job numbers, there is speculation about potential revisions in tax policies, including changes to inheritance tax rules.
Despite the strong performance of GDP, the FTSE 100 index did not see a significant uplift, falling by 0.3% during early trading sessions. This indicates that investor sentiment may not yet fully align with the positive economic data, reflecting lingering uncertainties regarding the future.
In the corporate world, notable financial successes were reported with Admiral Group seeing a staggering 69% increase in profit totaling £521 million, and Aviva experiencing a 22% rise in operating profit reaching £1.1 billion in the first half of 2025. These gains have contributed to positive stock price momentum.
Additionally, the National Grid confirmed plans to sell its Grain LNG business for £1.7 billion to Centrica and Bridgepoint, illustrating a strategic shift in the energy sector amidst changing market dynamics.
Chancellor Rachel Reeves has outlined a focus on improving productivity while reducing red tape in the upcoming autumn budget, indicating a proactive approach to address economic challenges. However, the potential for tax increases remains a concern for ongoing growth expectations into the third quarter.
The UK’s GDP grew by 0.4% month-on-month in June 2025.
The services sector saw a growth of 0.4% and the construction sector achieved 1.2% growth.
The strong GDP figures may delay any further interest rate cuts by the Bank of England until next year.
Despite positive GDP growth, the FTSE 100 fell by 0.3% in early trading.
| Feature | Details |
|---|---|
| June GDP Growth | 0.4% month-on-month |
| Second Quarter Growth | 0.3% quarter-on-quarter |
| Services Sector Growth | 0.4% growth |
| Construction Sector Growth | 1.2% growth |
| Hospitality Sector Growth | 2.4% growth |
| Real GDP per Head | 0.2% increase |
| Profit Increase (Admiral Group) | 69% increase, £521 million |
| Profit Increase (Aviva) | 22% increase, £1.1 billion |
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