UK growth slows as economy feels effect of higher business costs

UK economic growth slowed as US President Donald Trump's tariffs hit and businesses grappled with higher costs, official figures show.

A measure of everything produced in the economy, gross domestic product (GDP), expanded just 0.3% in the three months to June, according to the Office for National Statistics (ONS).

It's a slowdown from the first three months of the year when businesses rushed to prepare for Mr Trump's taxes on imports, and GDP rose 0.7%.

But it's also a stronger showing than expected and relatively welcome news for Chancellor Rachel Reeves, whose government has staked its success on growing the economy.

Economists polled by Reuters had only anticipated GDP expansion of 0.1% across April to June.

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The figure was better than anticipated after a strong June. Across the month, GDP rose 0.4%, surprising observers.

What happened?

Caution from customers and higher costs for employers, however, led to the lower growth reading up to June rather than the previous quarter.

Economic activity in April and May, in particular, was weak as purchases were brought forward to early in the year ahead of the stamp duty change and tariff changes.

Costs rose for households in April as energy, water and council tax bills rose, leading to higher inflation overall.

Employers were hit with higher costs in the form of more expensive national insurance contributions and increased minimum wages.

Growth came from services, the largest sector of the economy, with computer programming, health and vehicle leasing performing well, the ONS's director of economic statistics, Liz McKeown, said.

Political reaction

Ms Reeves described the figures as "positive with a strong start to the year and continued growth in the second quarter".

"But there is more to do to deliver an economy that works for working people," she added.

"I know that the British economy has the key ingredients for success but has felt stuck for too long.

"That is why we're investing to rebuild our national infrastructure, cutting back on red tape to get Britain building again and boosting the national minimum wage to make work pay. There's more to do".