For the data behind the commentary, download the full August 2025 UK Economy & Housing Report.
Upside/downside
While there continues to an evolution on tariff policy that is hard to keep up with, the two most relevant revelations for the UK economy were in all, to be expected, but came with a tinge of ‘surprise’ – if you can stretch that far.
The first point was a 25 basis point rate cut from the Bank of England, which was in line with expectations but much more hawkish in delivery than expected. The decision only passed after a second round of voting – at 5-4, with the MPC messaging very much
managing expectations on further cuts during the rest of 2025, and highlighting the ‘stickiness’ of inflation.
The second point was after two monthly declines, UK GDP surprised on the upside. GDP increased 0.4% month-on-month during June, resulting in a quarterly uptick of 0.3%. This means that year-on-year, the economy has grown by 1.4%. The June growth was much higher than had been expected against a backdrop of sluggish business and consumer confidence, albeit there is likely some seasonality associated with the uptick.
THE LAST DAYS OF SUMMER?
Without wanting to wish the summer away, the release Public finances data for June remind us that Autumn is just around the corner. The latest release suggests that the current budget deficit is running hotter than the OBR’s forecasts - £20.7 billion compared to 17.1 billion.
With the government setting aside £9.9 billion of headroom in the Spring Statement, this is likely already eroded by elevated gilts, the reversal on winter fuel payments, and increased defence spending targets. This all means that tax rises are likely to be needed come the Autumn Budget.
Additionally, the impact of – and the uncertainty – of tariffs will continue to have an impact, with the US Government announcing on 8th July that pharmaceutical tariffs could reach 200%, while on 8th August, there was an announcement of upcoming 100% tariffs on semiconductors.
Nevertheless, for now, let’s focus on the positives. Enjoy the rest of the summer!
