GDP grew by 0.4% in June – industry reaction

Latest ONS data has shown that GDP rose 0.4% month-on-month in June, following a 0.1% fall in May. The market had expected 0.1% growth

GDP rose 0.3% in the quarter, versus market expectations of 0.1% growth, with services output growing by 0.3% month-on-month. Construction output grew 0.3% month-on-month whilst Production output grew 0.7% month-on-month.

ONS Director of Economic Statistics Liz McKeown said “Growth slowed in the second quarter after a strong start to the year. The economy was weak across April and May, with some activity having been brought forward to February and March ahead of Stamp Duty and tariff changes, but then recovered strongly in June.

“Across the second quarter as a whole growth was led by services, with computer programming, health and vehicle leasing growing. Construction also increased while production fell back slightly. Growth for the quarter was also boosted by updated source data for April, which while still showing a contraction, was better than initially estimated.

“Services also drove growth in June with scientific R&D, engineering and car sales all having a strong month. Within production, which recovered, manufacture of electronics performed especially well.”

Tina McKenzie, Policy Chair at the Federation of Small Businesses, said“These figures will be no comfort to small firms and everyone under pressure in the real economy – rising costs, barriers to finance and high business rates are all draining investment and hampering growth. 

“Our latest Small Business Index (SBI) shows how for the first time since records began, more small firms are bracing for contraction, closure or sale over the next year (27%) than those expecting to grow (25%).

“This loss of momentum matters because when small firms pause hiring or shelve investment plans, it directly feeds into the national growth picture. There is an urgent needs to tackle the barriers we already know are holding small firms back.

“The Government’s Small Business Plan includes a welcome commitment to legislate against late payments, which close 38 businesses every day, and measures to make access to finance easier and more affordable so small firms can invest and grow. Its pledge to cut the regulatory burden by 25 per cent is also encouraging, and small businesses will be looking closely at how this is delivered in practice.

“However, it can’t end there. Business rates remain a heavy weight on small firms, and while the Small Business Plan’s commitment to address them is welcome, the Autumn Budget will be the moment to focus support on the smallest businesses and give high streets a fighting chance of recovery.

“The Government can help give firms confidence to hire by accepting the House of Lords’ key amendments to the harmful employment rights bill, which adds to the severe pressures we are seeing on jobs and recruitment into work. 

“The priority now has to be making sure we’re creating a climate where small firms can do what they do best – employ people and grow the economy in every community in the UK.”

Mike Randall, CEO at Simply Asset Finance said “Sluggish GDP growth this quarter shines a further spotlight on the business impact of National Insurance hikes. As costs have increased, investing in growth and innovation has, for the time being, had to take a back seat for SMEs.

“Despite this bump in the road, businesses on the ground remain keen to press on – and with recent infrastructure announcements from the Government across the country – the potential for growth is sky high.

“But this requires businesses to have ready access to the right funding and support so they can strike while the iron is hot.  Both the government and specialist lenders will play an important role here – giving businesses the toolkit needed to make their ambitions a reality.”

Anna Leach, Chief Economist at the Institute of Directors, said “The slowdown in growth in Q2 reflects businesses adjusting activity in response to US tariff changes and UK stamp duty reforms. Even so, growth held up better than expected, supported by strength in ICT and non-market health. On the expenditure side, growth has been driven by government expenditure and capital spending, perhaps reflecting some of the spending that was bumped up in last year’s Budget starting to come through.

“It is good to see a stronger growth outturn than many feared. But it is striking that momentum is coming from the public sector, with consumer spending slowing and business investment contracting. Private sector growth is being held back by both global and domestic policy uncertainty, with speculation over forthcoming tax increases adding to the headwinds. We urge the government to adopt a strategic approach to policy, prioritising removing blockers to growth – particularly in the planning system – and enhancing the efficiency of the tax system.”