UK Economic Growth Held Up, But Factories Stood Still

UK economic growth slowed to 0.4% between April and June, according to the first estimate for the quarter published by the Office for National Statistics on 13 August. That is down from the 0.6% recorded in the first three months of the year, and it landed exactly where City forecasters had said it would. Measured against the same quarter of 2025, the economy is 1.2% larger.

The quarter was lopsided. Output shrank 0.1% in April, went nowhere at all in May, then rebounded 0.3% in June. Services did nearly all the lifting, growing 0.5% across banking, insurance, hotels and similar businesses. Construction added 0.3%. Production — the slice covering factories, mining and energy — managed precisely nothing.

That split matters more than the headline figure. A country can post respectable-looking numbers while its industrial base treads water, and the composition of the growth shapes what happens to borrowing costs next. The Bank of England held Bank Rate at 3.75% on 30 July, three of its nine rate-setters wanted it higher, and the Budget arrives on 28 October.

Where the 0.4% Actually Came From

Household spending rose 0.3% over the quarter and 1% on the year, with recreation and culture leading, followed by household goods. Warm weather and a heavy summer of sport helped: the World Cup kicked off in June and England reached the semi-finals. Businesses told the ONS that both showed up in their takings.

The genuine surprise is business investment, which jumped 1.7% in the quarter and now sits 0.8% above its level a year ago. Part of that is defensive rather than confident — manufacturers have been stockpiling to guard against supply disruption. Trade barely moved in net terms: exports and imports each rose 0.5%, leaving the deficit excluding non-monetary gold at 1% of nominal GDP.

Why the Pubs Were Full but Tills Weren't

Here is the catch buried in the consumer numbers. Spending shifted around rather than expanding. Thomas Pugh, chief economist at RSM UK, put it bluntly ahead of the release.

Consumers were likely switching away from restaurants towards pubs to watch the World Cup, rather than increasing the total amount of spending.

That distinction separates a real consumer recovery from a reshuffle of the same money. A packed beer garden in June and an empty dining room the same night nets out to roughly zero. It also means the June bounce may not repeat, because the tournament and the heatwave that flattered it have both ended.

Is Britain Really the Fastest in the G7?

Chancellor John Healey seized on the figures, saying the UK has delivered the fastest growth in the G7 this year and that the government must, in his words, double down and drive growth in every postcode. The claim rests largely on the strong first quarter rather than this one.

Liz McKeown, the ONS director of economic statistics, offered a cooler read, noting that growth slowed in the second quarter but stayed relatively robust. Rob Wood of Pantheon Macroeconomics made a similar point, arguing the economy has held up against the hit from the war in Iran — the conflict that has kept energy prices high and volatile all year.

What Slower UK Economic Growth Means for Your Money

For most households the GDP number only matters through what it does to rates and prices. On that front, the news is mixed rather than bad.

The Bank Rate Is Stuck at 3.75%

Policymakers voted 6-3 to hold in July. Inflation eased to 2.6% in June from 2.8% in April and May, but Governor Andrew Bailey warned the relief may prove temporary while Middle East energy costs stay unpredictable. A slower quarter alone is unlikely to force a cut.

Three Rate-Setters Wanted a Rise, Not a Cut

Megan Greene, Huw Pill and Catherine Mann all voted for a quarter-point increase. That is the detail worth noting if you are hoping cheaper mortgages are coming: the dissent on the committee is pointing upwards, and the number of dissenters grew from two to three.

If Your Fixed Rate Ends This Winter

Lenders price fixes off expectations, not today's Bank Rate. With growth softening but inflation risk live, sharp falls in fixed-rate deals look unlikely before the Budget. Start shopping around roughly six months before your deal expires, and check whether your lender lets you lock a rate early and switch if pricing improves.

What to Watch Before the 28 October Budget

Put 0.4% in perspective: sustained for a year, it works out at roughly 1.6% growth — steady, not spectacular, and enough to nudge GDP per head up 1% on the year. Watch three things now. The revised estimate, which often moves the initial figure. The September inflation print, which feeds directly into benefit and pension uprating. And the OBR forecast alongside Healey's Budget, which will decide whether tax rises are back on the table this autumn.