What factors influence UK economic growth
After a long period of instability, analysts have noted economic growth in the UK. However, it is too early to say that the crisis has been overcome.
Domestic and global issues in recent years have negatively impacted the country’s economic prospects. The key reasons for the instability include:
– the global economic slowdown;
– the new fiscal spending plan;
– trade agreements with a number of leading countries.
At the beginning of 2025, experts did not foresee any positive developments in the British market. However, the situation began to improve in the second quarter. Analysts noted positive economic trends, facilitated by a 1.2% increase in retail sales in April. This indicator shows an improvement in consumer sentiment, which is confirmed by the growth of the confidence index. The national currency also strengthened, with the pound rising 0.6% to reach US$1.35.
This economic growth came as a surprise to experts. Notably, this upturn occurred amid the introduction of new import tariffs. Analysts had predicted that Trump’s policies would negatively impact the UK economy.
Country trends
Despite the emergence of positive signals, it is still too early to discuss a complete economic recovery. According to a Pantheon Macroeconomics expert, the growth may be due to random factors. There is no guarantee that these positive dynamics will continue throughout the year. The growth in retail sales could be due to seasonal fluctuations rather than political processes.
Nevertheless, there are grounds for cautious optimism in certain sectors of the economy. In July, the British energy regulator Ofgem reduced electricity tariffs by 7%. This will reduce the average utility bill for households by approximately £11, which may stimulate growth in other areas.
According to JPMorgan’s forecast, the UK economy could expand by 0.6% by the end of 2025. One factor supporting this growth is the high level of household savings. This strengthens consumer confidence and drives spending.
Factors limiting economic growth
At the same time, structural constraints remain, hampering economic recovery. Among them are:
– high inflation;
– weak employment figures;
– slow wage growth.
However, positive developments are emerging against this backdrop. Analysts have lowered their inflation forecasts, and the unemployment rate is gradually declining. According to official statistics, average income in the UK increased by nearly 6% year over year. At the same time, inflation stood at 3.5% in April.
Overall, economic dynamics remain unstable. This makes it difficult to speak with confidence about long-term growth.
