Share this post:
The last three months’ 0.3 per cent growth looks better than feared – but the real story is about weather, quirks, and spin. Underneath all that, investment is plunging, payroll jobs are falling, and the Bank of England says inflation won’t be back to target until 2027.
The new numbers
The UK economy grew by 0.3 per cent between April and June, slowing from 0.7 per cent in the first quarter but beating the 0.1 per cent economists had predicted.
June was stronger than expected, up 0.4 per cent, and April’s fall was revised from a nasty –0.3 per cent to a milder –0.1 per cent. The services sector drove most of the gain; construction chipped in; production shrank. On a per-person basis, GDP rose just 0.2 per cent.
Chancellor Rachel Reeves was quick to claim this as proof her “growth-first” plan is working.
But a closer look at the numbers – and at what’s actually driving them – suggests she can’t take the credit.
Why the “beat” happened
-
Timing quirks and the weather. Some activity was dragged forward into February–March to dodge April’s stamp duty change and anticipated US tariffs. That flattered Q1 (the first three months of 2025) and meant a natural slowdown in Q2. A sunnier spring than usual gave construction a one-off lift of 1.2 per cent.
-
Narrow growth engines. Services rose 0.4 per cent, driven by IT consultancy and health output. Retail actually dragged the economy for most of the quarter. Household spending edged up by just 0.1 per cent – barely moving.
-
Business investment collapsed. UK business investment fell by four per cent in Q2, erasing earlier gains. Overall fixed investment slipped 1.1 per cent. If Reeves has “fixed the foundations,” firms clearly haven’t noticed.
The same approach as her ‘jobs created’ boast
Earlier this week, Reeves told the country Labour had “created 384,000 more jobs” in its first year. The number comes from the Workforce Jobs count, which logs positions not people. If you have two jobs, you’re counted twice.
The government’s own PAYE payrolls data – which counts actual people in employee jobs – shows the opposite: around 170,000 fewer people on payrolls than a year ago, with six consecutive months of decline.
Vacancies have been falling for years, but unemployment is steady at 4.7 per cent – almost certainly because more people are taking second jobs to make ends meet.
It’s the same tactic by Reeves: pick the measure that flatters the most, ignore the less flattering twin, and present it as proof of success.
Foundations aren’t ‘fixed’ just because the weather’s nice
Reeves’s other headline claims look equally shaky:
-
“Real wages are up.” True, but only by around 1–1.5 per cent earlier this year, and the pace is slowing. That’s nowhere near enough to reverse decades of stagnation.
-
“We’ve unblocked planning.” The OBR estimates the total GDP gain from current planning and infrastructure changes will be just 0.2 per cent by 2030.
-
“Trade deals with the US, India and EU.” The India agreement exists; the EU one is modest; the US “deal” isn’t a free trade agreement at all – and US tariffs have already driven UK goods exports to their lowest in over three years.
The Bank of England isn’t convinced
Today’s resilience is making the Bank of England more cautious about cutting interest rates quickly. In August, it raised its inflation forecast: CPI is now expected to peak near four per cent this autumn and only return to the two per cent target in 2027.
The Bank Rate has been cut to four per cent after five quarter-point trims over the past year – but if inflation sticks, that’s as far as it may go for a while.
Strong, broad-based growth with surging productivity would encourage faster cuts. We’re not there.
The fiscal hole
The National Institute of Economic and Social Research says Reeves faces a £41.2 billion gap in her finances if she sticks to her own borrowing rules – likely requiring tax rises in the Autumn Budget.
That’s hardly the backdrop for sustained expansion.
So what should we take from today?
-
Yes, growth has beaten forecasts – but for narrow, mostly temporary reasons.
-
The UK’s core weaknesses – weak investment, falling payroll jobs, stagnant consumer spending – remain.
-
Reeves’s habit of using flattering definitions and selective metrics makes her “fixed foundations” line ring hollow.
Britain’s economy keeps stumbling over the low bar forecasters set.
Until real wages rise decisively, investment turns up, and job gains show in the number of people in work rather than just the number of jobs counted, the foundations remain cracked.
Share this post:
UK growth beats forecasts – but the economic ‘foundations’ still aren’t fixed
Share this post:
The last three months’ 0.3 per cent growth looks better than feared – but the real story is about weather, quirks, and spin. Underneath all that, investment is plunging, payroll jobs are falling, and the Bank of England says inflation won’t be back to target until 2027.
The new numbers
The UK economy grew by 0.3 per cent between April and June, slowing from 0.7 per cent in the first quarter but beating the 0.1 per cent economists had predicted.
June was stronger than expected, up 0.4 per cent, and April’s fall was revised from a nasty –0.3 per cent to a milder –0.1 per cent. The services sector drove most of the gain; construction chipped in; production shrank. On a per-person basis, GDP rose just 0.2 per cent.
Chancellor Rachel Reeves was quick to claim this as proof her “growth-first” plan is working.
But a closer look at the numbers – and at what’s actually driving them – suggests she can’t take the credit.
Why the “beat” happened
Timing quirks and the weather. Some activity was dragged forward into February–March to dodge April’s stamp duty change and anticipated US tariffs. That flattered Q1 (the first three months of 2025) and meant a natural slowdown in Q2. A sunnier spring than usual gave construction a one-off lift of 1.2 per cent.
Narrow growth engines. Services rose 0.4 per cent, driven by IT consultancy and health output. Retail actually dragged the economy for most of the quarter. Household spending edged up by just 0.1 per cent – barely moving.
Business investment collapsed. UK business investment fell by four per cent in Q2, erasing earlier gains. Overall fixed investment slipped 1.1 per cent. If Reeves has “fixed the foundations,” firms clearly haven’t noticed.
The same approach as her ‘jobs created’ boast
Earlier this week, Reeves told the country Labour had “created 384,000 more jobs” in its first year. The number comes from the Workforce Jobs count, which logs positions not people. If you have two jobs, you’re counted twice.
The government’s own PAYE payrolls data – which counts actual people in employee jobs – shows the opposite: around 170,000 fewer people on payrolls than a year ago, with six consecutive months of decline.
Vacancies have been falling for years, but unemployment is steady at 4.7 per cent – almost certainly because more people are taking second jobs to make ends meet.
It’s the same tactic by Reeves: pick the measure that flatters the most, ignore the less flattering twin, and present it as proof of success.
Foundations aren’t ‘fixed’ just because the weather’s nice
Reeves’s other headline claims look equally shaky:
“Real wages are up.” True, but only by around 1–1.5 per cent earlier this year, and the pace is slowing. That’s nowhere near enough to reverse decades of stagnation.
“We’ve unblocked planning.” The OBR estimates the total GDP gain from current planning and infrastructure changes will be just 0.2 per cent by 2030.
“Trade deals with the US, India and EU.” The India agreement exists; the EU one is modest; the US “deal” isn’t a free trade agreement at all – and US tariffs have already driven UK goods exports to their lowest in over three years.
The Bank of England isn’t convinced
Today’s resilience is making the Bank of England more cautious about cutting interest rates quickly. In August, it raised its inflation forecast: CPI is now expected to peak near four per cent this autumn and only return to the two per cent target in 2027.
The Bank Rate has been cut to four per cent after five quarter-point trims over the past year – but if inflation sticks, that’s as far as it may go for a while.
Strong, broad-based growth with surging productivity would encourage faster cuts. We’re not there.
The fiscal hole
The National Institute of Economic and Social Research says Reeves faces a £41.2 billion gap in her finances if she sticks to her own borrowing rules – likely requiring tax rises in the Autumn Budget.
That’s hardly the backdrop for sustained expansion.
So what should we take from today?
Yes, growth has beaten forecasts – but for narrow, mostly temporary reasons.
The UK’s core weaknesses – weak investment, falling payroll jobs, stagnant consumer spending – remain.
Reeves’s habit of using flattering definitions and selective metrics makes her “fixed foundations” line ring hollow.
Britain’s economy keeps stumbling over the low bar forecasters set.
Until real wages rise decisively, investment turns up, and job gains show in the number of people in work rather than just the number of jobs counted, the foundations remain cracked.
Share this post:
you might also like
More mistakes in the script? Correcting Cameron’s New Year speech
Osborne wants a ‘year of hard truths’. Here’s one: He’s HIDING the truth
Divisions in Coalition as MPs demand independent inquiry on poverty