UK GDP growth forecast revised higher for second quarter

The United Kingdom’s gross domestic product is expected to have recorded modest expansion in the second quarter of 2025, with preliminary estimates suggesting a quarter on quarter rise of 0.2%, improving from the previous projection of flat growth

The revised forecast, released by the Office for National Statistics on August 14, represents a welcome improvement from the sluggish economic momentum experienced earlier in the year. The data will provide crucial insights into the UK’s economic trajectory as policymakers assess the effectiveness of recent monetary and fiscal policy measures.

The GDP figure, regarded as a key indicator of economic health, measures the change in market value of all goods and services produced within the UK compared to the previous quarter. The calculation involves statistical data, forecast models, and expert assessments of economic activity across various sectors.

Market observers noted that even this modest increase could be perceived positively for sterling, as it indicates gradual recovery in economic activity following a period of subdued performance.

The improvement from the previous flat growth forecast reflects resilience in certain sectors, particularly services and consumer spending, though manufacturing and construction trends remain mixed.

The UK economy had shown stronger momentum in the first quarter of 2025, recording growth of 0.7% quarter-on-quarter, driven by increases in the services sector, production, and construction. However, more recent monthly data indicated a slowdown, with GDP estimated to have fallen 0.3% in April, largely due to declining services output.

The preliminary second-quarter data will be closely watched by the Bank of England as it considers future interest rate decisions. The central bank has already cut rates five times since August 2024, bringing the base rate to 4%, and modest growth could support a continued cautious approach to monetary easing.

Economic analysts suggest the gradual improvement reflects the lagged effects of previous policy measures and some stabilisation in consumer confidence. However, they cautioned that external factors including global trade conditions, persistent inflationary pressures, and volatile energy prices continue to pose challenges.

The services sector, which accounts for the largest share of UK economic output, is expected to have provided the primary driver of growth, supported by continued consumer spending despite cost-of-living pressures. Manufacturing performance likely remained subdued amid global supply chain challenges and reduced export demand.