Much of the economic focus so far this year has been on the tariff chaos cascading from the White House, but with the passing of the latest trade talks deadline at the beginning of August it may be that calmer financial geopolitics lie ahead. The UK remains very much a favoured-nation with its overall rate of 10% compared to higher rates for all of its global competitors, although elements of our trade deal with the US remain frustratingly unconfirmed, especially on steel exports.

So far as the UK economy is concerned, we are in a state of limbo ahead of the Autumn Budget. All manner of speculation is swirling around, trying to predict where the inevitable higher taxes might fall amid a flurry of ‘kite flying’ by unnamed government sources about various property tax and wealth tax options, as well as restrictions to inheritance tax reliefs. In the meanwhile, business investment is largely paralysed until the future tax landscape becomes clearer. This is not good news for growth prospects.

GDP – June 2025

• After successive falls of 0.1% in April and May, growth returned in June with a plus of 0.4%. The more meaningful overall Q2 25 figure was a gain of 0.3% and for H1 25 the UK economy rose by 1.0%.
• Breaking down Q2 25 into its component parts, the dominant services sector delivered growth of 0.4%. The best performing sub-sectors were technology and communications (+2%) followed by health and social work (+1.1%). The laggards were led by wholesale and retail (-0.9%).
• Production GDP fell by 0.3%. The major negative sub-sector was energy (-6.8%) but there were notable wins for pharma (+7%) and machinery and equipment (+3%).
• Construction GDP rose by a healthy 1.2%, led by private housing repair and maintenance (+3.3%) and infrastructure new work (+3.2%).
• Consumer-facing services GDP was 0.3% higher.

Inflation – July 2025

• CPI inflation in July increased from 3.6% to 3.8%. Financial markets had expected 3.7%.
• The major factors pushing inflation higher were grocery prices, air fares and hotel costs.
• ‘Core’ inflation (excluding the more volatile elements, such as housing and energy costs) rose from 3.7% to 3.8%.
• Service sector inflation went up from 4.7% to 5%.
• The latest forecast by the Bank of England predicts that the inflation peak will be 4% in September 2025. It had previously predicted a lower peak of 3.7%, also in September.
• The net rise in disposable income has now fallen to just 0.2% after adjusting for inflation.

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 this situation is said to be improving. For what they’re worth, ONS figures show:

• Unemployment was unchanged at 4.7% in the quarter to June 2025.
• Economic inactivity was 21% of the working population aged between 16 and 64.
• Vacancies in the quarter to July fell by 44k and are well below pre-pandemic levels. This was the 37^th consecutive fall.
• Pay growth was static at 5.0%, but this remains an ongoing threat to inflation control.
• Construction employment fell in Q2 25 to its second lowest level in a quarter of a century.

Interest rates

The August MPC meeting duly delivered the much anticipated cut from 4.25% to 4%, but with the continuing rise in inflation exceeding market expectations and the Bank of England being forced to raise its estimate of the peak, there is now some uncertainty about there being another reduction this year.

Insolvencies – July 2025

Individual monthly figures for business failures have been inconsistent for some time. The numbers have alternated between a rise and a fall every month since October 2024. On a non seasonally-adjusted basis for the whole UK, there were 2,308 corporate insolvencies in July 2025. This was up by a marginal 1% compared to July 2024 and 5% higher than in June 2025. Looking much further back, the current figure was 44% higher than pre-pandemic in February 2020. The more meaningful rolling twelve-month total for July 2025 was 25,395. This is 6% down on a year previously and 7% down on the all-time high in February 2024.

Drilling down into the detail, the trend away from business rescue through Administration continues, while creditor enforcement is growing rapidly. 17% of July 2025’s failures were Compulsory Liquidations compared to 14% in July 2024. Only 6% of insolvencies were Administrations, as they were in July 2024. They were 11% immediately pre-pandemic.

What next for UK businesses?

The cost increases from the Autumn 2024 Budget are still working their 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 with limited financial resources. The question now is how many.

Hospitality is currently the most vulnerable sector. The latest quarterly survey by the trade body, UKHospitality has revealed that:

• Over two thirds of respondents are now having to operate at or below 85% of their minimum required capacity.
• Almost three quarters have less than six months’ cash reserves and a fifth have none at all.
• 79% have been forced to increase prices.
• More than half have cut staff.

When there is so much uncertainty, imposing ever stronger financial discipline and increased risk awareness are the only logical strategies. As we slide into autumn, it looks like a long and harsh financial winter lies ahead for many UK businesses.

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.