Growth in the UK economy slumped in the second quarter of this year amid pressure from tariff uncertainty and tax increases. According to the Office for National Statistics (ONS), gross domestic product (GDP) increased by 0.3% for the quarter after 0.7% growth in the first three months of the year.
The figure was stronger than the 0.1% level widely expected by economists, but only due to an uptick in activity in June driven by a “strong” performance for scientific research and development, engineering and car sales. This came after two consecutive months of decline. While the latest figures may deliver “some encouragement” to Chancellor Rachel Reeves, they may paint a more “worrying” picture for UK households, an expert has said. Here’s what the latest data may mean for your money.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the online investment platform, said: “For consumers, weaker growth in the second quarter is worrying. If earnings stagnate and redundancies ramp up, many households could face renewed financial strain.”
The Office for National Statistics (ONS) released figures this month showing the rate of UK unemployment stood at 4.7% in the three months to June – a four-year high.
Meanwhile, average earnings growth, excluding bonuses, remained at 5% for the period to June. UK vacancies tumbled by 44,000 over the three months to July to 718,000 – the lowest number of job openings since April 2021.
The latest inflation figures for the UK, as measured by the Consumer Prices Index (CPI), increased to 3.6% in the year to June, up from 3.4% in the year to May. The Bank of England anticipates the growth rate to hit 4% in September, double the Government-set target of 2%.
Ms Haine said: “A softening labour market, stubbornly high inflation, slowing wage increases and a higher tax burden present a troublesome combination for household budgets.”
While five Bank of England interest rate cuts since August last year have offered some relief, Ms Haine noted that the latest 25 basis-point reduction to 4% may not be reflected in lower borrowing costs across the board.
She said: “Some lenders remain cautious about future rate cut expectations amid niggling inflationary pressures. With food prices continuing to surge, the Bank of England has signalled that interest rates may need to remain elevated for longer as it expects consumer price inflation to peak at 4% in September.”
Ms Haine continued: “This will deliver a blow to households, with many still grappling with the lingering effects of the cost-of-living crisis.
“Taking control of personal finances now is key – whether that means tackling high-interest debts, building up emergency savings or preparing for potential job losses.
“Long periods without an earned income can be financially devastating, which is why a proactive approach can help households weather any unexpected shocks.”
