The United Kingdom’s economy shrank by 0.1% in April 2025, according to official data from the Office for National Statistics (ONS). The monthly decline reversed part of the 0.4% expansion seen in March and matched economists’ forecasts exactly.
Services drag growth lower
The contraction was primarily driven by a 0.2% fall in the services sector, which accounts for the bulk of UK output. The ONS highlighted weakness in public administration as well as arts, entertainment, and recreation. Manufacturing output also edged lower, while construction activity remained flat. Within construction, a 0.1% rise was entirely due to repair and maintenance work; new construction fell by 0.3%, despite government pledges to accelerate housebuilding.
Longer-term picture remains positive
Despite the monthly dip, the broader trend remains one of modest expansion. Over the three months to April, GDP grew by 0.7% (or 0.3% according to some sources), indicating that underlying economic activity is still positive. The ONS notes that the three-month measure is generally less volatile than single-month figures.
Energy costs and geopolitical tensions bite
The slowdown came amid rising energy costs and geopolitical uncertainty linked to the closure of the Strait of Hormuz. Higher oil and energy prices are being passed through to businesses and consumers, raising input costs and dampening confidence. Fergus Jimenez-England, associate economist at the National Institute of Economic and Social Research, warned that the impact is likely to intensify, particularly in the third quarter as the energy price cap rises.
Bank of England policy in focus
The data lands at a sensitive time for the Bank of England, which is balancing still-elevated inflation against a weakening growth backdrop. While a single month’s figure is unlikely to trigger an immediate rate move, it adds to the case for caution. Some economists suggest the central bank may hold off on further hikes if the slowdown persists.
Market reaction
The British pound saw modest buying after the release, with GBP/USD climbing back toward 1.3410, recovering earlier losses. Market participants now await upcoming inflation and labour market data for clearer signals on the health of the UK economy.
