U.K economy growth slows 0.3% between April & June.

April 2025: Economic Soft Patch

GDP and Sectoral Performance

The UK economy contracted by 0.3% in April 2025 compared with March, marking the sharpest monthly drop in around 18 months .

Despite this monthly dip, real GDP grew by 0.7% over the three months to April when compared to the previous quarter, supported by gains in all main sectors .

Breaking it down by sector in April:

Services output fell by 0.4%, the dominant drag on GDP .

Production declined by 0.6% .

Construction bucked the trend with 0.9% growth in April .

Broader Economic Context

April was dubbed “Awful April” by media due to significant spikes in household bills—particularly energy and water—contributing to elevated inflation levels (~3.5% in May) .

The confidence narrative amid a soft growth month diverged sharply with market sentiment: the FTSE 100 hit a record closing high, fueled by global investor shifts away from US markets .

Forecast Adjustments

Oxford Economics downgraded its GDP forecast for 2025 from 1.2% to 1.1%, linking this revision to April’s unexpectedly deep output drop—but noting it may reflect “payback” for stronger Q1 rather than deeper deterioration .

June 2025: The Economy Rebounds with Modest Growth

GDP and Recovery Patterns

The economy expanded by 0.3% in Q2 2025 (April–June), surpassing expectations—economists had forecast just 0.1% growth .

June itself showed notable resilience: following a dip in May, output rose 0.4% in June alone, driven by broad-based strength across services, industrial output, and construction .

Labour Market and Other Indicators

The unemployment rate remained elevated, at 4.7%, the highest in four years. Job vacancies fell sharply to 718,000, the lowest since April 2021 .

Wage growth remained positive—regular pay up 5% YoY, though real wage growth dipped to ~1.5%, pressured by inflation .

Policy Outlook

The Bank of England cut its main interest rate by 0.25 percentage points to 4.0%, aiming to support growth amid slowing GDP and sticky inflation (~3.6%) .

Policymaker remarks reflected caution: while gradual easing was on the table, concerns persisted over inflation, wages, and growth risks .

Summary Table

Period Key Developments

April 2025 GDP fell 0.3% MoM; services and production dropped; construction rose; inflation and household costs surged; FTSE 100 hit record highs.

June 2025/ Q2 Q2 GDP grew 0.3% despite weak April–May; strong June recovery across key sectors; unemployment high at 4.7%; wages positive but not keeping pace with inflation; BoE rate cut to 4.0%

What It Means

Short-term fluctuations: April’s dip suggests temporary softness—possibly seasonal or bill-driven—but activity revived in June.

Underlying fragility: The elevated unemployment rate and sluggish real wage growth point to deeper structural concerns in the labor market.

Monetary policy balancing act: The Bank of England is navigating competing pressures—supporting growth without unleashing inflation.

Outlook cautious: Forecasts remain moderate. Longer-term momentum hinges on easing inflation, pr

oductivity gains, and policy effectiveness (e.g., infrastructure investment) .