It’s been difficult for some months now to focus on anything other than the geopolitical mayhem emanating from the White House, whether it is the shilly-shallying over tariffs or the apparently empty rhetoric about the endlessly imminent solution of the many vicious conflicts around the world. The degree to which utterly extraordinary events have become normalised is an astonishing development, but not an especially edifying one.

Despite this, the UK business community is far more productively occupied watching the growing list of adverse indicators emerging on the UK economy. Our financial and fiscal dashboard really is beginning to flash a deepening shade of red. Inflation is heading north, GDP south and the labour market is rapidly weakening.

This has prompted the Office for Budget Responsibility to describe the dangers to our public finances as “daunting”. Its report noted that high government debt servicing costs were reducing the UK economy’s capacity to withstand future economic shocks.

GDP – May 2025

• Growth fell again in May, dropping by 0.1%, compared to market expectations of a rise of 0.1%. The fall in April had been 0.3%.
• The dominant services sector delivered marginal growth of 0.1% after a fall of 0.3% in April. Legal services and IT were up, but retail fell after four months of growth.
• Production GDP fell sharply by 0.9% after a 0.6% fall in April. The major negative sub-sectors were oil and gas, car manufacturing and pharmaceuticals.
• Construction GDP fell by 0.6% (it had been up 0.8% in April), hit by a 2.1% drop in repair and maintenance activity.
• Consumer-facing services GDP was 1.2% lower, with major falls in retail (-2.7%), sport and recreation (-3.5%) and travel (-4.2%).
• Looking at the more reliable three-month numbers, GDP rose by 0.5% in the quarter to May, driven higher by service sector growth.

Inflation – June 2025

• CPI inflation in June rose unexpectedly from 3.4% to 3.6%. Financial markets had expected no change.
• The major factors pushing inflation higher were food and drink, rail and air fares and e-books.
• ‘Core’ inflation (excluding the more volatile elements, such as housing and energy costs) rose from 3.5% to 3.7%.
• Service sector inflation was steady at 4.7%, but this was also higher than expected.
• The latest forecast by the Bank of England predicts that the inflation peak will be 3.7% in September 2025.

Employment

Labour force data published by the Office for National Statistics is acknowledged by ONS to be unreliable because of low survey response rates since the pandemic, although it is claimed that this situation is improving. Nevertheless, ONS figures show:

• Unemployment has now moved up to 4.7% in the quarter to May 2025. This is 0.8% higher than pre-pandemic.
• Economic inactivity fell to 21% of the working population aged between 16 and 64.
• Vacancies fell by 56k to 727k and are now 8.6% below pre-pandemic levels.
• Pay growth has come down to 5.0% from 5.3%, but this remains an ongoing threat to inflation control.

Federation of Small Businesses survey

The latest FSB survey covering Q2’25 gives a reading of -44, compared to -41 in the previous quarter. The highlight is that 27% of respondents expect their business to shrink, be sold or close in the next twelve months, compared to only 25% predicting growth. This is the first time since the survey started in 2010 that pessimists have outweighed optimists. The top three reasons cited are: the stagnant economy, the Employment Rights Bill and the record tax burden.

Insolvencies – June 2025

Individual monthly figures for business failures have been inconsistent for some time. After a mini-surge in May, the numbers for June are back close to April’s level. On a non seasonally-adjusted basis for the whole UK, there were 2,203 corporate insolvencies in June 2025. This was down 11% compared to June 2024 and 9% lower than May 2025. The more meaningful rolling twelve-month total for June 2025 was 25,374. This is 5% down on a year previously.

Drilling down into the detail:

• The trend away from business rescue through Administration continues, while creditor enforcement via a Winding Up Petition and Compulsory Liquidation is growing rapidly.
• 18% of June 2025’s failures ended in Compulsory Liquidation compared to 14% in June 2024.
• Only 5% of insolvencies were Administrations, down from 7% in June 2024 and 11% immediately pre-pandemic.

What next for UK businesses?

It’s clearly too soon to believe that the global economic turmoil is settling down, especially with yet another tariff deadline looming on 1 August. No matter what that date brings, it will take time to assess the impact of whatever is announced.

Here at home, there is the prospect of at least one interest rate cut and probably two by the end of this year to reduce debt servicing costs for those businesses and consumers who are not on a fixed rate deal. But looming large in the background is the rising clamour about prospective tax rises in the forthcoming Autumn Budget.

All the while the cost increases from the last Budget are working their destructive way through the business models of many companies, especially those in sectors such as retail, hospitality, leisure and charities. Inevitably, there will be casualties and especially among smaller companies.

When so much uncertainty abounds, applying even stronger financial discipline and risk awareness to running businesses is the obvious strategy.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 0203 995 6380, you will be able to get immediate assistance from our Partner-led team.