A month on from our last look at the UK economy and its prospects, our economic review for June 2025 has yet more evidence of just how volatile the global and domestic conditions are. A blizzard of bilateral trade deals involving Britain and variously, India, the USA and the EU have been announced, if not necessarily worked out in any detail. In addition, the USA seems to have blinked in its standoff with China, but the threat to re-impose high tariffs on other countries remains.

The outcomes from all of this trade turmoil are far from clear, so it remains a puzzle how UK business leaders are supposed to plan and more importantly, why they would commit amid such uncertainty to the level of investment without which there can be no hope of sustained growth.

In a separate challenge to the business community, the notorious Scattered Spiders group of hackers have reminded us how vulnerable even the most sophisticated and successful companies are to cyber-attacks. M&S has indicted that it would be affected until July by the cyber-attack it suffered in late April and admitted that the hit to its profits could be as much as £300m over and above its insurance cover. It is unlikely that the sort of attacks at M&S as well as at the Co-Op and Harrods will be the end of this commercial horror story.

The economic background for the UK to all of this is yet again a mixed bag of good and less good news.

Economic indicators for the UK

GDP

• Q1 2025 growth surprised on the upside, coming in at 0.7%, compared to market expectations of only 0.6%. The previous quarter’s figure was only a rise of 0.1%.
• Services and production GDP grew by 0.7% and 1.1%, respectively, while construction was static.
• All commentators are predicting far tougher conditions for the rest of 2025 as the Autumn Budget measures bite and reflecting the gross uncertainties generated by America’s global trade war.

Inflation

• CPI inflation in April 2025 suffered a predicted reverse, shooting up from 2.6% to 3.5%. This was higher than the City consensus estimate of 3.3% and the Bank of England’s expectation of 3.4%.
• The major factors were sharp increases in prices for water and energy bills, transport costs, council tax and hospitality.
• ‘Core’ inflation (excluding the more volatile elements, such as housing and energy costs) also rose from 3.4% to 3.8%.
• Service sector inflation increased too: from 4.7% in March to 5.4% in April.
• The expectation is still that inflation will fall later in the year but the 3.7% peak previously expected by the Bank of England is now less certain. 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 by the continuing global trade war and the unpredictability of American trade policy.

Employment

Labour force data published by the Office for National Statistics is acknowledged by ONS to be unreliable and would be ignored if it wasn’t so crucial to government fiscal policy. Nevertheless, ONS figures show:

• Unemployment has settled for now at 4.4% in the quarter to March 2025. This is 0.5% higher than pre-pandemic.
• Economic inactivity is heading the other way, falling slightly from 21.5% to 21.4%.
• Vacancies fell by 26k and are at long last finally back below pre-pandemic levels.
• Pay growth is still worryingly elevated at 5.9%. This remains an ongoing threat to inflation control.

Insolvencies

After rising steadily in the early months of 2025, business failures have steadied. There were 2,193 non-seasonally adjusted company insolvencies across the UK in April, compared to 2,225 in March. This was 11% lower than a year ago in April 2024, although very substantially higher by 37% than immediately pre-pandemic in February 2020.

Underlying the overall totals, two clear trends can be seen, which confirm anecdotal comment that has been circulating within the insolvency profession.  Creditor enforcement action is rising sharply, with Compulsory Liquidations now up to 19% 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 5% of insolvencies this month as against 7% a year ago. These are ominous signs for struggling businesses.

Confidence levels

Consumers

For consumers, the mood is sombre. The well-respected GfK Consumer Confidence Index for April was down by four points to -23. Respondents cited as their main reasons the Autumn Budget measures, council tax rises and utility bill increases, plus warnings they were seeing about the impact of America’s tariff increases on inflation.

Business

This seems to be a classic case of ‘you pays your money and you takes your choice’. The latest survey by the Institute of Chartered Accountants covers attitudes amongst its members in Q1 2025 and was down to -3, the weakest reading since Q4 2022. 56% of the sample quoted tax increases as the major influence on their confidence level.

By contrast, the Economic Confidence Index for April 2025 published by the Institute of Directors rose from -58 to -51, the least negative outcome since September 2024. This was despite the survey fieldwork being carried out immediately after the so-called ‘Liberation Day’ tariff announcements in Washington.

What next for UK businesses?

If the growth figures for Q1 2025 created a faintly positive glow about the economy, this was dashed a few days later by worse than expected inflation numbers. It’s not just the prospect of another battle against rising costs, but the likelihood that it will slow the reduction in interest rates craved by businesses. The uncertainty about global tariffs is also deeply unhelpful, undoubtedly causing a good many ‘pause’ or ‘cancel’ buttons to be clicked on potential investment plans.

As always, this sort of scenario creates as many opportunities for entrepreneurial CEOs as it keeps risk-aware CFOs awake at night. Vigilance, diligence, financial discipline and caution need to be the guiding principles for the time being.

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.