As we look at the economy this month, here in the UK there is little cheer. With a succession of adverse statistics in recent weeks doing little to dispel the feeling that the government’s efforts to promote and then deliver the growth that is desperately needed to repair the public finances, have yet to bear any tangible fruit.

The initial Israel/Iran conflict, which was intensified by American bombing of the three nuclear sites at Fordow, Isfahan and Natanz in Iran has added another level of uncertainty to what was already a deeply-troubled global economy. This comes on top of the economic repercussions of America’s trade policy, with the next flash point coming soon on 9 July, when the pause on the ‘Liberation Day’ retaliatory tariffs is due to end.

Describing the cease fire as ‘fragile’ seriously understates the volatility of this part of the more general Middle East crisis, especially if it turns out that the impact of Israeli and American military strikes on Iran’s nuclear facilities has been more limited than initial claims, as is rumoured as we write this economic snapshot.

Economic indicators for the UK

GDP

• Growth fell in April, dropping by 0.3%, compared to market expectations of only 0.1%. This follows the Q1 2025 rise of 0.7% and is the worst individual monthly fall since October 2023.
• Services and production GDP fell by 0.4% and 0.6%, respectively, while construction reversed previous poor months by rising 0.9%, buoyed by increased housebuilding starts.
• The consensus is that April was depressed by activity being shifted back into March to pre-empt US tariff threats. GDP was up 0.7% for the quarter to April, with all three sectors of the economy growing.

Inflation

• CPI inflation in April 2025 was steady at 3.4% against the revised figure for March, which reflected the correction of errors in the previous calculation.
• The major factors were lower transport costs on one hand and rising food inflation for such items as chocolate, ice cream and meat.
• ‘Core’ inflation (excluding the more volatile elements, such as housing and energy costs) fell from 3.8% to 3.5%.
• Service sector inflation reduced too: from 5.8% in April to 5.3%.
• The latest OBR prediction is for an average of 3.2% in 2025 before the rate eventually falls back to the target level of 2% in 2027, but this remains clouded not just by the continuing global trade war but even more significantly by the Iran/Israel/US conflict.

Employment

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

• Unemployment has now moved up to 4.6% in the quarter to April 2025. This is 0.7% higher than pre-pandemic.
• Economic inactivity fell slightly to 21.3% of the working population aged between 16 and 64.
• Vacancies fell by 63k to 698k and are finally down below pre-pandemic levels.
• Pay growth has come down from 5.6% to 5.2%, but this remains an ongoing threat to inflation control.

A more meaningful picture of realities of the labour market comes from asking employers about their hiring intentions and the barriers they experience in recruiting and retaining staff. This information is available from ManpowerGroup, a leading global workforce solutions company, which publishes a quarterly Employment Outlook Survey, which has been running since 1962.

The latest Survey for Q3 2025 highlights the stark truth that employer hiring confidence has hit rock bottom, with their Hiring Outlook Index falling precipitately from 33 in Q2 2025 to only 19 now, a level not seen since the pandemic.

We recently examined the issues bedevilling the UK labour market.

Insolvencies

Business failures had steadied in April after rising in the early months of 2025. Now they’re on the rise once more. There were 2,417 non-seasonally adjusted company insolvencies across the UK in May, compared to 2,163 in April. This was 12% lower than a year ago in May 2024 and hugely higher by 51% than immediately pre-pandemic in February 2020.

Underlying the overall totals, two clear trends are continuing. Creditor enforcement action is rising sharply, with Compulsory Liquidations now up to 17% of failures compared to only 14% a year ago. At the same time, business rescues through the Administration route continue to decline, dropping to only 6% of insolvencies this month as against 10% pre-pandemic.

These are ominous signs for struggling businesses, especially as the impact of the Autumn Budget cost increases start to work through.

What next for UK businesses?

With the escalation of tensions in the Middle East following the outbreak of hostilities between Israel and Iran and the decision by America to become directly involved, there are even more ‘unknown unknowns’ for the global business community. Experience suggests that the current chances of a successful ceasefire is highly unlikely either to hold or to lead to any meaningful long-term peace.

As a major trading nation, the UK is heavily exposed to geopolitical developments. The timing could hardly be worse, coming as businesses are dealing with the impact of last Autumn’s Budget cost increases after they hit their profitability, viability and cash flow from the start of April. The Office for National Statistics report at the end of June revealed that 17 per cent of businesses had no business cash reserve to rely on. This is the highest proportion of trading businesses with no cash reserve since the question was introduced during the pandemic, in June 2020.

At the risk of being stuck in a cautious advisory groove, it’s obvious that businesses will need to maximise risk awareness in this scenario, while not passing up worthwhile opportunities, provided they are assessed with rigorous due diligence.

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.