UK GDP August 2025: A Modest Increase in a Slower Quarter
Britain’s economy expanded by a modest 0.1% in August 2025, according to the Office for National Statistics (ONS). The data underline a consolidating pattern in which production rose while services stalled and construction contracted, painting a picture of a diverging economy that is struggling to pick up sustained momentum as the year progresses.
ONS figures show production up 0.4% in August, contrasted with flat service activity and a 0.3% fall in construction. Economists had expected month-on-month growth of about 0.1%, so the outcome aligns with forecasts for a cautious economy but still marks a softer rhythm than earlier in the year. The August reading also prompted a revision to July’s data, with the ONS saying the economy actually shrank 0.1% after a prior flat reading. June had grown by 0.4%, signaling that the year’s early strength has given way to a more subdued pace.
The August performance is part of a broader narrative about the UK economy in 2025: a strong first half followed by a more modest second half, as momentum cools and domestic demand faces headwinds. Analysts stress that the third-quarter GDP release, due in mid-November, will be closely watched for further signs about whether momentum can be rekindled or if the economy remains stuck in a low-growth environment.
What the breakdown says about the economy
The production sector’s 0.4% rise reflects strength in manufacturing and energy-related activity, but the stagnation in services is telling. Services represent the largest share of UK GDP, so flatlining there limits the overall growth impulse even when other sectors perform better. The construction decline of 0.3% adds to concerns about the stability of investment-driven gains and the health of the housing market and related sectors.
Market observers interpreted the August results as broadly in line with the consensus that the economy would slow after a robust late-2024 and early-2025. As Deutsche Bank economist Sanjay Raja noted, there has been a missing “second-half acceleration,” with momentum shifting to a lower gear after a strong start to 2025. This pattern mirrors typical post-boom retrenchment as businesses and households recalibrate in response to policy signals and external conditions.
Policy implications and the outlook
The August data come at a delicate juncture for policymakers. With the Autumn Budget approaching, finance minister Rachel Reeves will consider tax measures and spending plans that could temper consumer spending and business investment if the aim is to curb inflationary pressures or address public finances. Analysts say the key issue for policymakers is whether growth can regain its footing without reigniting inflation.
Market strategists emphasized that the Bank of England (BoE) would prefer to see clearer progress on inflation before delivering further rate cuts. Goldman Sachs highlighted that while there is a case for easing, the central bank is likely to wait for tangible progress in services inflation, particularly as food prices remain a source of upside pressure. The BoE’s assessment of inflation dynamics will largely shape the timing of any additional stimulus or tightening measures.
Beyond the immediate policy debate, several economists flag risks to the outlook. While the first half of 2025 benefited from favorable demand and policy levers, the second half faces potential drag from weaker consumer confidence, tighter fiscal policy, and external conditions. The consensus points to a GDP trajectory around the 0.2% quarter-on-quarter pace in the near term, but with downside risks that could temper the recovery prospects.
Bottom line
August 2025’s 0.1% GDP gain reflects a decelerating trend in the UK economy, driven by a services sector that failed to grow and a construction sector that contracted, despite a positive production performance. The data reinforce the call for a careful, growth-friendly policy stance that supports investment and household resilience while keeping inflation in check. As policymakers weigh the Autumn Budget and the path for monetary policy, the market will be watching for signs that momentum can be restored without compromising price stability.
