London, Aug. 14 — Britain’s economy grew faster than forecast in the second quarter of 2025, defying the combined strain of higher business taxes and US trade tariffs, official figures revealed Thursday.
Gross domestic product expanded by 0.3% between April and June, according to the Office for National Statistics (ONS), surpassing analysts’ expectations of just 0.1% growth. This follows a robust 0.7% expansion in the first quarter.
“Today’s economic figures are positive with a strong start to the year and continued growth in the second quarter,” said Finance Minister Rachel Reeves. “But there is more to do to deliver an economy that works for working people.”
The figures provide a welcome boost for Prime Minister Keir Starmer’s Labour government after a challenging first year in office marked by sluggish growth and political pressure over living costs.
Services Lead the Way
ONS data showed that gains in construction and services offset a decline in production. Services growth was driven by sectors such as computer programming, health, and vehicle leasing.
Overall GDP climbed by 0.4% in June, rebounding from slight contractions in April and May. “Growth in all sectors, including manufacturing, is a sign that the economy may be regaining momentum,” said Danni Hewson, head of financial analysis at AJ Bell.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that the June recovery “will be welcome news for the government, which has had a frustrating time chasing elusive growth.”
Tariff and Tax Headwinds
The stronger-than-expected data comes despite economic headwinds. In April, the UK raised its business tax and was hit by a 10% baseline tariff from US President Donald Trump on most UK goods.
Although London and Washington struck a May deal to reduce tariffs on some products, including vehicles, the impact on trade has been severe. Exports to the US fell by £700 million in June to their lowest level since February 2022.
“The value of goods exports to the United States has remained relatively low since the introduction of tariffs in April,” the ONS said.
Labour Market Strain and Policy Uncertainty
On Wednesday, official figures showed unemployment had risen to 4.7% in the second quarter — a four-year high. Economists attribute part of the rise to the business tax hike.
The Bank of England responded last week by trimming its base interest rate to 4% in an effort to support growth. However, some analysts warn that resilient GDP figures could make policymakers more cautious about further cuts.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the outlook remains uncertain. “The full drag on business investment from April’s tax rises has yet to be felt. And ongoing speculation about further tax rises in the autumn budget will probably keep consumers in a cautious mood.”
While the latest numbers show unexpected resilience, analysts agree that Britain’s economy is still navigating a fragile recovery, with trade frictions, higher taxes, and global economic weakness casting shadows over the rest of the year.