UK Economy Slows Less Than Expected: What It Means for Investors and Businesses in Oman
LONDON – Britain’s economy exceeded expectations in the second quarter, demonstrating resilience amid the challenges posed by US tariffs and an increased UK business tax, according to official data released on Thursday.
The Office for National Statistics (ONS) reported that gross domestic product (GDP) grew by 0.3% between April and June, surpassing analysts’ forecasts of just 0.1% growth. This follows a robust 0.7% expansion in the first quarter.
Finance Minister Rachel Reeves described the figures as “positive,” highlighting a strong start to the year and continued growth in the second quarter. However, she emphasized that “more needs to be done to deliver an economy that works for working people,” reflecting ongoing struggles to achieve significant growth during the Labour government’s first year in power.
The ONS data indicated that growth in the UK’s construction and services sectors helped counterbalance a decline in production. Liz McKeown, ONS Director of Economic Statistics, noted that the growth was driven chiefly by services, including computer programming, healthcare, and vehicle leasing.
June saw a 0.4% increase in GDP following slight contractions in April and May, a development welcomed by analysts. Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented that the June growth would be “welcome news for the government, which has had a frustrating time chasing elusive growth.”
However, official figures released on Wednesday revealed UK unemployment reached a four-year high of 4.7% in the second quarter. This rise coincided with two major developments in April: an increase in the UK business tax under Prime Minister Keir Starmer’s government and the imposition of a 10% baseline tariff by the US on most British goods, introduced by former President Donald Trump.
In May, London and Washington reached an agreement to reduce tariffs exceeding 10% on certain UK-made products imported by the US, particularly vehicles. Danni Hewson, head of financial analysis at AJ Bell, remarked that “a favourable trade agreement has enabled output to pick up again,” noting June’s growth across all sectors, including manufacturing.
Despite this recovery, UK goods exports to the US in June fell by £700 million ($950 million), marking the lowest level since February 2022. The ONS observed that the “value of goods exports to the United States has remained relatively low since the introduction of tariffs in April.”
In response to these threats to growth from US tariffs, the Bank of England last week reduced its key interest rate by a quarter point to 4%. Ruth Gregory, deputy chief UK economist at Capital Economics, warned that the weak global economy will continue to hamper UK GDP growth, noting that the full impact of April’s tax increases on business investment has yet to be realized. She also highlighted that ongoing speculation about further tax hikes in the autumn budget is likely to temper consumer confidence.
Streeter added that “evidence of a more resilient economy may mean that Bank of England policymakers are more cautious about cutting interest rates in the months ahead.” — AFP
Special Analysis by Omanet | Navigate Oman’s Market
The UK’s better-than-expected Q2 growth despite US tariffs and higher business taxes highlights resilience in service-led sectors and strategic trade negotiations. For Omani businesses, this underscores the importance of diversifying trade partnerships and focusing on service innovation amid global uncertainties. Smart investors should monitor evolving trade policies and sectoral shifts in major economies like the UK to identify new opportunities and hedge against geopolitical risks.
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