Published: 16:23, October 2, 2025
UK economy weakens amid sluggish consumption, investment
By Xinhua
People walk past a shop advertising inexpensive gift for Easter in Richmond, southwest London, on March 27, 2025. (PHOTO / AP)

London - Data released by the UK Office for National Statistics (ONS) on Tuesday showed that the country's economic growth momentum remains persistently weak.

According to the ONS, the UK economy grew by 0.7 percent quarter-on-quarter in the first quarter of this year, but the pace slowed to 0.3 percent in the second quarter, in line with earlier estimates. Data from July indicated zero month-on-month growth, while purchasing managers' index (PMI) figures for August and September point to further weakening.

Data released by S&P on Wednesday showed the UK manufacturing PMI fell to 46.2 in September, a five-month low. Rob Dobson, director at S&P Global Market Intelligence, said the decline reflected growing challenges for manufacturers, including weak demand, falling export orders, and rising tax and labor costs. Business confidence for the next 12 months also remains at a relatively low level.

The outlook for the services sector in the second half of the year is also far from optimistic. ONS data shows retail volumes fell 0.1 percent from June to August, following a 0.6 percent drop from May to July. Helen Dickinson, chief executive of the British Retail Consortium (BRC), said that although high street footfall improved slightly in August, overall retail traffic continued to decline for the fourth consecutive month.

Weak private consumption has been a major drag on growth. ONS data showed household disposable income rose 0.2 percent between April and June. But instead of boosting consumption, it actually increased savings. The household saving ratio rose by 0.2 percentage points to 10.7 percent. According to the ONS, the rise in savings mainly came from non-pension income, meaning that average UK working families chose to allocate more income to savings rather than spending.

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Persistently high inflation has weighed on consumer sentiment. In both July and August, the consumer price index (CPI) rose 3.8 percent year-on-year, among the highest in the G7. Data from the BRC showed that in August, food prices increased 4.2 percent year-on-year, further eroding household confidence.

Sarah Bradbury, CEO of the Institute of Grocery Distribution, noted that food price inflation was in line with expectations, and consumer confidence has fallen for the third straight month. Rising household energy bills and uncertainty over possible tax hikes in the Autumn Budget have added to the pressure on consumer spending.

Business investment confidence has also weakened. ONS data showed private capital investment fell 1.1 percent quarter-on-quarter from April to June, compared with a 3 percent increase a year earlier. The ONS attributed the decline mainly to reduced equipment investment. While gross fixed capital formation rose 0.5 percent quarter-on-quarter, the pace was far below last year's 2.9 percent increase.

Private sector investment confidence has been hit hard by global economic uncertainty and the rise in UK employers' national insurance contributions. With businesses also concerned that the upcoming Autumn Budget may bring further tax hikes, companies are becoming even more cautious about future investment.

For research institutions and industry bodies, ensuring stable growth in the UK economy depends on unlocking its growth potential, particularly in private consumption and business investment. Boosting consumption requires curbing inflation, while fostering business investment depends on policy stability and restoring confidence.

Rain Newton-Smith, director-general of the Confederation of British Industry, urged the government to reduce costs for businesses and encourage investment.

Shevaun Haviland, director-general of the British Chambers of Commerce, noted that while progress in infrastructure, overseas investment and trade is important, the Autumn Budget should avoid new tax burdens on companies and instead use the tax system to incentivize investment and growth.