The economy of the United Kingdom shrank by 0.1 percent in May 2025, after shrinking by 0.3 percent in April 2025. As of the most recent month, the UK economy is around 4.4 percent larger than it was in February 2020, just before the start of COVID-19 lockdowns. After a record 19.6 percent decline in GDP in April 2020, the UK economy quickly returned to growth in the following months, and grew through most of 2021. Cost of living crisis lingers into 2025 As of December 2024, just over half of people in the UK reported that their cost of living was higher than it was in the previous month. Although this is a decline from the peak of the crisis in 2022 when over 90 percent of people reported a higher cost of living, households are evidently still under severe pressure. While wage growth has outpaced inflation since July 2023, overall consumer prices were 20 percent higher in late 2024 than they were in late 2021. For food and energy, which lower income households spend more on, late 2024 prices were almost 30 percent higher when compared with late 2021. According to recent estimates, living standards, as measured by changes in disposable income fell by 2.1 percent in 2022/23, but did start to grow again in 2023/24. Late 2023 recession followed by growth in 2024 In December 2023, the UK economy was approximately the same size as it was a year earlier, and struggled to achieve modest growth throughout that year. Going into 2023, a surge in energy costs, as well as high interest rates, created an unfavorable environment for UK consumers and businesses. The inflationary pressures that drove these problems did start to subside, however, with inflation falling to 3.9 percent in November 2023, down from a peak of 11.1 percent in October 2022. Although relatively strong economic growth occurred in the first half of 2024, with GDP growing by 0.7 percent, and 0.4 percent in the first two quarters of the year, zero growth was reported in the third quarter of the year. Long-term issues, such as low business investment, weak productivity growth, and regional inequality, will likely continue to hamper the economy going forward.

The UK economy grew by 0.7 percent in the first quarter of 2025, compared with 0.1 percent growth in the previous quarter. After ending 2023 in recession, the UK economy grew strongly in the first half of 2024, growing by 0.8 percent in Q1, and 0.4 percent in Q2, with growth slowing in the second half of the year. In the third quarter of 2020 the UK experienced record setting growth of 16.8 percent, which itself followed the record 20.3 percent contraction in Q2 2020. Growing economy key to Labour's plans Since winning the 2024 general election, the UK's Labour Party have seen their popularity fall substantially. In February 2025, the government's approval rating fell to a low of -54 percent, making them almost as disliked as the Conservatives just before the last election. A string of unpopular policies since taking office have taken a heavy toll on support for the government. Labour hope they can reverse their declining popularity by growing the economy, which has underperformed for several years, and when measured in GDP per capita, fell in 2023, and 2024. Steady labor market trends set to continue? After a robust 2022, the UK labor market remained resilient throughout 2023 and 2024. The unemployment rate at the end of 2024 was 4.4 percent, up from four percent at the start of the year, but still one of the lowest rates on record. While the average number of job vacancies has been falling since a May 2022 peak, there was a slight increase in January 2025 when compared with the previous month. The more concerning aspect of the labor market, from the government's perspective, are the high levels of economic inactivity due to long-term sickness, which reached a peak of 2.84 million in late 2023, and remained at high levels throughout 2024.

Graph and download economic data for OECD based Recession Indicators for the United Kingdom from the Peak through the Period preceding the Trough (DISCONTINUED) (GBRRECDP) from 1955-02-01 to 2022-09-30 about peak, trough, recession indicators, and United Kingdom.

The United Kingdom's economy grew by 1.1 percent in 2024, after a growth rate of 0.4 percent in 2023, 4.8 percent in 2022, 8.6 percent in 2021, and a record 10.3 percent fall in 2020. During the provided time period, the biggest annual fall in gross domestic product before 2020 occurred in 2009, when the UK economy contracted by 4.6 percent at the height of the global financial crisis of the late 2000s. Before 2021, the year with the highest annual GDP growth rate was 1973, when the UK economy grew by 6.5 percent. UK economy growing but GDP per capita falling In 2022, the UK's GDP per capita amounted to approximately 37,371 pounds, with this falling to 37,028 pounds in 2023, and 36,977 pounds in 2024. While the UK economy as a whole grew during this time, the UK's population grew at a faster rate, resulting in the negative growth in GDP per capita. This suggests the UK economy's struggles with productivity are not only stagnating, but getting worse. The relatively poor economic performance of the UK in recent years has not gone unnoticed by the electorate, with the economy consistently seen as the most important issue for voters since 2022. Recent shocks to UK economy In the second quarter of 2020, the UK economy shrank by a record 20.3 percent at the height of the COVID-19 pandemic. Although there was a relatively swift economic recovery initially, the economy has struggled to grow much beyond its pre-pandemic size, and was only around 3.1 percent larger in December 2024, when compared with December 2019. Although the labor market has generally been quite resilient during this time, a long twenty-month period between 2021 and 2023 saw prices rise faster than wages, and inflation surge to a high of 11.1 percent in October 2022.

The gross domestic product of the United Kingdom was around 2.56 trillion British pounds, an increase when compared to the previous year, when UK GDP amounted to about 2.54 trillion pounds. The significant drop in GDP visible in 2020 was due to the COVID-19 pandemic, with the smaller declines in 2008 and 2009 because of the global financial crisis of the late 2000s. Low growth problem in the UK Despite growing by 0.9 percent in 2024, and 0.4 percent in 2023 the UK economy is not that much larger than it was before the COVID-19 pandemic. Since recovering from a huge fall in GDP in the second quarter of 2020, the UK economy has alternated between periods of contraction and low growth, with the UK even in a recession at the end of 2023. While economic growth picked up somewhat in 2024, GDP per capita is lower than it was in 2022, following two years of negative growth. UK's global share of GDP falling As of 2024, the UK had the sixth-largest economy in the world, behind the United States, China, Japan, Germany, and India. Among European nations, this meant that the UK currently has the second-largest economy in Europe, although the economy of France, Europe's third-largest economy, is of a similar size. The UK's global economic ranking will likely fall in the coming years, however, with the UK's share of global GDP expected to fall from 2.16 percent in 2025 to 2.02 percent by 2029.  

A survey from late 2022 found that over ***** in **** respondents in the UK would cancel their pay TV subscriptions in a recession and switch to free ad-supported streaming TV options, like Pluto TV and Freevee. By contrast, ** percent would keep their paid subscriptions.

Between February and April 2021, the weekly gross domestic product (GDP) growth rate increased sharply in the United Kingdom. After April 2021, however, it started to decrease significantly, until July 2021. In the following period, the GDP maintained a relatively stable weekly growth rate, and increased to 12.89 percent at the beginning of 2022. From January 2022 onwards, it started a gradual decrease, and reached its lowest rate during December 2022. This was followed by a period of sharp fluctuations between January and April 2023.

In 2024, the gross domestic product (GDP) of the United Kingdom grew by *** percent and is expected to grow by just *** percent in 2025 and by *** percent in 2026. Growth is expected to slow down to *** percent in 2027, and then grow by ***, and *** percent in 2027 and 2028 respectively. The sudden emergence of COVID-19 in 2020 and subsequent closure of large parts of the economy were the cause of the huge *** percent contraction in 2020, with the economy recovering somewhat in 2021, when the economy grew by *** percent. UK growth downgraded in 2025 Although the economy is still expected to grow in 2025, the *** percent growth anticipated in this forecast has been halved from *** percent in October 2024. Increased geopolitical uncertainty as well as the impact of American tariffs on the global economy are some of the main reasons for this mark down. The UK's inflation rate for 2025 has also been revised, with an annual rate of *** percent predicated, up from *** percent in the last forecast. Unemployment is also anticipated to be higher than initially thought, with the annual unemployment rate likely to be *** percent instead of *** percent. Long-term growth problems In the last two quarters of 2023, the UK economy shrank by *** percent in Q3 and by *** percent in Q4, plunging the UK into recession for the first time since the COVID-19 pandemic. Even before that last recession, however, the UK economy has been struggling with weak growth. Although growth since the pandemic has been noticeably sluggish, there has been a clear long-term trend of declining growth rates. The economy has consistently been seen as one of the most important issues to people in Britain, ahead of health, immigration and the environment. Achieving strong levels of economic growth is one of the main aims of the Labour government elected in 2024, although after almost one year in power it has so far proven elusive.

Using micro-data on six surveys–the Gallup World Poll 2005–2023, the U.S. Behavioral Risk Factor Surveillance System, 1993–2022, Eurobarometer 1991–2022, the UK Covid Social Survey Panel, 2020–2022, the European Social Survey 2002–2020 and the IPSOS Happiness Survey 2018–2023 –we show individuals’ reports of subjective wellbeing in Europe declined in the Great Recession of 2008/9 and during the Covid pandemic of 2020–2021 on most measures. They also declined in four countries bordering Ukraine after the Russian invasion in 2022. However, the movements are not large and are not apparent everywhere. We also used data from the European Commission’s Business and Consumer Surveys on people’s expectations of life in general, their financial situation and the economic and employment situation in the country. All of these dropped markedly in the Great Recession and during Covid, but bounced back quickly, as did firms’ expectations of the economy and the labor market. Neither the annual data from the United Nation’s Human Development Index (HDI) nor data used in the World Happiness Report from the Gallup World Poll shifted much in response to negative shocks. The HDI has been rising in the last decade reflecting overall improvements in economic and social wellbeing, captured in part by real earnings growth, although it fell slightly after 2020 as life expectancy dipped. This secular improvement is mirrored in life satisfaction which has been rising in the last decade. However, so too have negative affect in Europe and despair in the United States.

Using micro-data on six surveys–the Gallup World Poll 2005–2023, the U.S. Behavioral Risk Factor Surveillance System, 1993–2022, Eurobarometer 1991–2022, the UK Covid Social Survey Panel, 2020–2022, the European Social Survey 2002–2020 and the IPSOS Happiness Survey 2018–2023 –we show individuals’ reports of subjective wellbeing in Europe declined in the Great Recession of 2008/9 and during the Covid pandemic of 2020–2021 on most measures. They also declined in four countries bordering Ukraine after the Russian invasion in 2022. However, the movements are not large and are not apparent everywhere. We also used data from the European Commission’s Business and Consumer Surveys on people’s expectations of life in general, their financial situation and the economic and employment situation in the country. All of these dropped markedly in the Great Recession and during Covid, but bounced back quickly, as did firms’ expectations of the economy and the labor market. Neither the annual data from the United Nation’s Human Development Index (HDI) nor data used in the World Happiness Report from the Gallup World Poll shifted much in response to negative shocks. The HDI has been rising in the last decade reflecting overall improvements in economic and social wellbeing, captured in part by real earnings growth, although it fell slightly after 2020 as life expectancy dipped. This secular improvement is mirrored in life satisfaction which has been rising in the last decade. However, so too have negative affect in Europe and despair in the United States.

Fund management activities revenue is forecast to rise at a compound annual rate of 0.7% over the five years through 2024-25 to £28.2 billion, including estimated growth of 7.8% in 2024-25. Fund managers have had to navigate turbulent markets in recent years, hit by aggressive monetary policy, geopolitical tensions and muted economic growth. Such uncertainty made investors antsy, triggering volatile capital flows and creating unstable fee income. Economic uncertainty surrounding markets amid the threat of a recession, the cost-of-living squeeze and the gilt crisis in 2022-23 all shook key investor segments, causing the first net outflow in funding in 2022 since data was first recorded. Despite conditions remaining bleak in 2023-24, financial markets made a slow recovery, with both bond and stock markets benefitting from the expectation of interest rate cuts, triggering a rally at the tail-end of the year. However, amid fierce price competition and falling fees, this wasn’t enough to offset the drop in revenue during 2023-24. Capital markets are set to perform well in 2024-25 thanks to further interest rate cuts and optimistic growth prospects supporting investment activity, driving up profit. However, fund managers exposed to US markets have seen hefty declines at the start of 2025, hit by Trump’s erratic tariff policies, which incited fears of a recession. Revenue is expected to grow at a compound annual rate of 4.4% over the five years through 2029-30 to £35 billion. Capital markets will continue to grow in 2025-26, propped up by the prospect of further rate cuts. However, equity remains vulnerable because soaring stock valuations seen in recent years can lead to a severe price correction if any negative news hits markets, hurting revenue growth. Already proving a useful tool for fund managers, AI will continue to gain momentum in the coming years, especially among smaller managers looking to improve data analytics capabilities and client offerings. Fund managers will also have to navigate the changing perceptions of ESG investments, which, although hitting the headlines over recent years, are beginning to lose the interest of investors due to their lower returns. While growth in the domestic economy may be slow in the coming years, investment companies will take advantage of growing opportunities in expanding markets, despite facing fiercer competition from foreign funds.

In the first quarter of 2025, the quarterly gross domestic product of the United Kingdom was approximately, 647 billion British pounds, compared with around 642.3 billion pounds in the previous quarter. The large dip in GDP that can be seen in the second quarter of 2020 saw the UK economy fall from 604.7 billion pounds to 481.8 billion, with more usual levels of output not recovering until well into 2021. The COVID-19 lockdowns enacted by the UK government at that time was the main reason for this large fall in GDP. Growth lagging as UK heads into 2025 After ending 2023 in recession, the UK economy started 2024 with the strongest quarterly GDP growth in several years, growing by 0.7 percent in the first quarter, and then by 0.4 percent in the second quarter. Economic growth in the second half of the year was, however, far less promising, with GDP flatlining in the third quarter, and monthly GDP shrinking by 0.1 percent in September and then again in October. Although GDP is still forecast to grow in 2025, the overall economic picture is precarious. In November, UK inflation rose to 2.6 percent, compared with just 1.7 percent in September, while the labor market continues to show signs of cooling after a period of high job vacancies and low unemployment. Labour pinning hopes on long-term growth After winning its first general election in 19 years in 2024, the Labour Government has seen its approval ratings plummet in its first few months in office. This shaky start is partly due to a government strategy of making unpopular decisions early in their tenure, which they hope will eventually encourage stable economic growth in the mid to long-term. By far the least popular policy was the withdrawal of winter fuel benefits for a significant number of pensioners, a cost-cutting measure deemed necessary due to the UK's vulnerable public finance position, with government debt at around 100 percent of GDP. A further measure introduced was a national insurance tax increase for employers, with almost half of UK firms citing increased taxes as their main external concern in Q3 2024. Avoiding any further tax rises or cuts to services will depend on if policies in other areas, such as planning reform, will kickstart the UK economy in time before the next election.

Using micro-data on six surveys–the Gallup World Poll 2005–2023, the U.S. Behavioral Risk Factor Surveillance System, 1993–2022, Eurobarometer 1991–2022, the UK Covid Social Survey Panel, 2020–2022, the European Social Survey 2002–2020 and the IPSOS Happiness Survey 2018–2023 –we show individuals’ reports of subjective wellbeing in Europe declined in the Great Recession of 2008/9 and during the Covid pandemic of 2020–2021 on most measures. They also declined in four countries bordering Ukraine after the Russian invasion in 2022. However, the movements are not large and are not apparent everywhere. We also used data from the European Commission’s Business and Consumer Surveys on people’s expectations of life in general, their financial situation and the economic and employment situation in the country. All of these dropped markedly in the Great Recession and during Covid, but bounced back quickly, as did firms’ expectations of the economy and the labor market. Neither the annual data from the United Nation’s Human Development Index (HDI) nor data used in the World Happiness Report from the Gallup World Poll shifted much in response to negative shocks. The HDI has been rising in the last decade reflecting overall improvements in economic and social wellbeing, captured in part by real earnings growth, although it fell slightly after 2020 as life expectancy dipped. This secular improvement is mirrored in life satisfaction which has been rising in the last decade. However, so too have negative affect in Europe and despair in the United States.

Using micro-data on six surveys–the Gallup World Poll 2005–2023, the U.S. Behavioral Risk Factor Surveillance System, 1993–2022, Eurobarometer 1991–2022, the UK Covid Social Survey Panel, 2020–2022, the European Social Survey 2002–2020 and the IPSOS Happiness Survey 2018–2023 –we show individuals’ reports of subjective wellbeing in Europe declined in the Great Recession of 2008/9 and during the Covid pandemic of 2020–2021 on most measures. They also declined in four countries bordering Ukraine after the Russian invasion in 2022. However, the movements are not large and are not apparent everywhere. We also used data from the European Commission’s Business and Consumer Surveys on people’s expectations of life in general, their financial situation and the economic and employment situation in the country. All of these dropped markedly in the Great Recession and during Covid, but bounced back quickly, as did firms’ expectations of the economy and the labor market. Neither the annual data from the United Nation’s Human Development Index (HDI) nor data used in the World Happiness Report from the Gallup World Poll shifted much in response to negative shocks. The HDI has been rising in the last decade reflecting overall improvements in economic and social wellbeing, captured in part by real earnings growth, although it fell slightly after 2020 as life expectancy dipped. This secular improvement is mirrored in life satisfaction which has been rising in the last decade. However, so too have negative affect in Europe and despair in the United States.

August 2024 marked a significant shift in the UK's monetary policy, as it saw the first reduction in the official bank base interest rate since August 2023. This change came after a period of consistent rate hikes that began in late 2021. In a bid to minimize the economic effects of the COVID-19 pandemic, the Bank of England cut the official bank base rate in March 2020 to a record low of *** percent. This historic low came just one week after the Bank of England cut rates from **** percent to **** percent in a bid to prevent mass job cuts in the United Kingdom. It remained at *** percent until December 2021 and was increased to one percent in May 2022 and to **** percent in October 2022. After that, the bank rate increased almost on a monthly basis, reaching **** percent in August 2023. It wasn't until August 2024 that the first rate decrease since the previous year occurred, signaling a potential shift in monetary policy. Why do central banks adjust interest rates? Central banks, including the Bank of England, adjust interest rates to manage economic stability and control inflation. Their strategies involve a delicate balance between two main approaches. When central banks raise interest rates, their goal is to cool down an overheated economy. Higher rates curb excessive spending and borrowing, which helps to prevent runaway inflation. This approach is typically used when the economy is growing too quickly or when inflation is rising above desired levels. Conversely, when central banks lower interest rates, they aim to encourage borrowing and investment. This strategy is employed to stimulate economic growth during periods of slowdown or recession. Lower rates make it cheaper for businesses and individuals to borrow money, which can lead to increased spending and investment. This dual approach allows central banks to maintain a balance between promoting growth and controlling inflation, ensuring long-term economic stability. Additionally, adjusting interest rates can influence currency values, impacting international trade and investment flows, further underscoring their critical role in a nation's economic health. Recent interest rate trends Between 2021 and 2024, most advanced and emerging economies experienced a period of regular interest rate hikes. This trend was driven by several factors, including persistent supply chain disruptions, high energy prices, and robust demand pressures. These elements combined to create significant inflationary trends, prompting central banks to raise rates in an effort to temper spending and borrowing. However, in 2024, a shift began to occur in global monetary policy. The European Central Bank (ECB) was among the first major central banks to reverse this trend by cutting interest rates. This move signaled a change in approach aimed at addressing growing economic slowdowns and supporting growth.

After reaching a peak of 10.7 percent in the fourth quarter of 2022, the CPI inflation rate in the United Kingdom has fallen considerably, and was 2.5 percent in the fourth quarter of 2024. In 2025, there is expected to be an uptick in inflation, with prices expected to be increasing by 3.7 percent in the third quarter of 2025, before falling to two percent by the second quarter of 2026. Inflation and the Cost of Living The high inflation experienced by the UK since late 2021 is one of the main factors behind the country's ongoing cost of living crisis. Price surges, in relation to food and energy costs in particular, played havoc with the finances of UK households. At the height of the crisis, around nine out of ten households were experiencing a cost of living increase compared to the previous month. Although inflation has eased since reaching a peak of 11.1 percent in October 2022, and wages are growing in real terms, approximately 59 percent of households were still experiencing rising costs relative to the previous month in March 2025. Economic growth downgraded for 2025 Since 2022, the economy has generally been the main issue for UK voters, seen by 51 percent of people as one of the top three issues facing the country in March 2025. Throughout this time, UK households have struggled through a cost of living crisis, while the wider economy has struggled to achieve consistent growth. Between the first quarter of 2022, the UK economy has alternated between periods of low growth and minor contractions, with the UK even in recession at the end of 2023. While there was a slight uptick in growth in 2024, this momentum appears to have already been lost, with the UK's economic growth forecast for 2025 recently downgraded from two percent to one percent.

A recent analysis on the impact of Brexit suggests that in 2023, the United Kingdom's economy was *** percent smaller than it would have been in a base scenario where the UK never left the EU. The estimated hit to the UK's gross domestic product (GDP) increases to ***** percent in 2024, and to *** percent by 2025 in this forecast. UK growth cut at start of turbulent 2025 After growing by *** percent in 2024, the UK economy is expected to grow by *** percent in 2025, down from an earlier forecast of *** percent. As of 2025, the UK economy is approximately *** percent larger than it was just before the COVID-19 pandemic five years earlier, which delivered a sudden and severe economic shock to the country. While the initial bounce back from this collapse was robust, the recovery slowed by the end of 2020, and it wasn't until late 2021 that the economy returned to its pre-pandemic size. Throughout 2022 and 2023, the economy continued to struggle, and even experienced a recession at the end of 2023. How voters feel about Brexit in 2025 Since the middle of 2021, a growing majority of voters in Britain have advised that they think Brexit was the wrong decision. As of January 2025, around ** percent thought it was wrong to leave the EU, compared with just ** percent in April 2021. By comparison, the share of Britons who think Brexit was the right decision has fallen from ** percent to ** percent in the same time period. Voters are, however, still quite divided on what relationship they want with the EU, with only ** percent supporting rejoining completely. Furthermore, Brexit has fallen behind other issues for voters such as the economy, the NHS, and immigration and the issue played a much smaller role in the 2024 election than it did in 2019.

As of the second quarter of 2025, the CPIH index in the United Kingdom was ***, indicating that consumer goods and services had increased in price by ** percent when compared with the baseline year of 2015. In June 2025, the CPIH inflation rate was *** percent, unchanged from the previous month. The CPIH index is the consumer price index, which also includes costs related to owning and maintaining a home. Inflation falls to more usual levels in 2024 After reaching a peak of *** percent in October 2022, the CPIH inflation rate fell throughout 2023 and into 2024, eventually falling to a low of *** percent in October 2024. Although the decline in energy inflation led to a significant fall in prices early in the 2023, other aspects of inflation, such as food prices remained high for a longer period. Throughout 2023 inflation in the UK was still quite high across many sectors, indicated by persistently high core inflation (inflation excluding food and energy prices) rates reported that year. UK economy continues to struggle Since the COVID-19 pandemic, the UK's economic performance has been quite lackluster. Although the economy bounced back from the initial drop in GDP caused by lockdowns, it has alternated between months of low growth and declines in GDP since 2021. In the last two quarters of 2023, the UK economy shrank by *** percent and then by *** percent. As a result, the UK economy officially ended 2023 in a technical recession. While growth picked up in the first half of 2024, there was no growth in the third quarter of the year.

With a Gross Domestic Product of over 4.3 trillion Euros, the German economy was by far the largest in Europe in 2024. The similarly sized economies of the United Kingdom and France were the second and third largest economies in Europe during this year, followed by Italy and Spain. The smallest economy in this statistic is that of the small Balkan nation of Montenegro, which had a GDP of 7.4 billion Euros. In this year, the combined GDP of the 27 member states that compose the European Union amounted to approximately 17.95 trillion Euros. The big five Germany’s economy has consistently had the largest economy in Europe since 1980, even before the reunification of West and East Germany. The United Kingdom, by contrast, has had mixed fortunes during the same period and had a smaller economy than Italy in the late 1980s. The UK also suffered more than the other major economies during the recession of the late 2000s, meaning the French economy was the second largest on the continent for some time afterward. The Spanish economy was continually the fifth-largest in Europe in this 38-year period, and from 2004 onwards, has been worth more than one trillion Euros. The smallest GDP, the highest economic growth in Europe Despite having the smallerst GDP of Europe, Montenegro emerged as the fastest growing economy in the continent, achieving an impressive annual growth rate of 4.5 percent, surpassing Turkey's growth rate of 4 percent. Overall,this Balkan nation has shown a remarkable economic recovery since the 2010 financial crisis, with its GDP projected to grow by 28.71 percent between 2024 and 2029. Contributing to this positive trend are successful tourism seasons in recent years, along with increased private consumption and rising imports. Europe's economic stagnation Malta, Albania, Iceland, and Croatia were among the countries reporting some of the highest growth rates this year. However, Europe's overall performance reflected a general slowdown in growth compared to the trend seen in 2021, during the post-pandemic recovery. Estonia experienced the sharpest negative growth in 2023, with its economy shrinking by 2.3% compared to 2022, primarily due to the negative impact of sanctions placed on its large neighbor, Russia. Other nations, including Sweden, Germany, and Finland, also recorded slight negative growth.