The UK economy defied US tariff pressures in the second quarter, expanding by 0.3% and outpacing most G7 peers despite a slowdown from the optimistic 0.7% growth seen earlier in the year. Strong performances in the services and construction sector helped drive the gains, offsetting a drop in manufacturing and other production sectors.
Compared with the same period last year, the economy expanded by 1.2%. While hardly spectacular, the performance has been enough to reassure policymakers and investors that the UK remains on a relatively stable path in a volatile global environment.
The UK leads the G7 on a half-year basis
Beneath the headline numbers, the picture was mixed. Services output rose by 0.4%, led by information and communication, health, and social work. Wholesale and retail trade, however, failed to keep pace.
Construction delivered the standout performance, climbing 1.2% thanks to strong infrastructure projects and private housing activity. In contrast, the production sector slipped by 0.3%, pulled lower by steep drops in electricity, gas and steam supply, as well as mining and quarrying. That said, manufacturing posted a slight 0.3% gain, buoyed by a 7.0% leap in pharmaceuticals and 3.0% growth in machinery and equipment.
A notable 0.4% uptick in monthly GDP for June—spanning services, production, and construction—helped counterbalance weak activity in April and May, pointing to a June-led recovery.
Trade dynamics painted a mixed picture. Export volumes rose by 1.6% year-on-year, largely due to stronger services exports, despite a 0.2% drop in goods exports. Import volumes rose 1.4%, driven by a rise in goods imports, while services imports slipped slightly.
The narrative underpinning the data included a pre-emptive economic pull-forward into February and March—companies front-loaded activity ahead of stamp duty adjustments and US tariff announcements. This phenomenon helped inflate Q1 figures and weighed on output in the early part of Q2, only for a rebound to surface in June.
When placed alongside global peers, the UK's performance in 2025 so far looks comparatively strong. In Q2 2025, the UK’s 0.3% growth rate matched or exceeded that of other G7 nations. France also grew 0.3%, while Canada was flat, and Germany and Italy contracted by 0.1% each.
Although the United States outpaced with 0.7% growth, the UK leads the G7 on a half-year basis. Combining Q1 and Q2 yields an annualised rate of 2.2%, the fastest in the group.
