Britain's economy slowed in the second quarter of 2025 after a strong start to the year, official figures showed on Tuesday, highlighting the challenges facing finance minister Rachel Reeves as she prepares for November's annual budget.

British gross domestic product growth slowed to 0.3% in April to June, from 0.7% in the first three months of the year, unrevised from initial ONS estimates and in line with economists' expectations in a Reuters poll.

Annual growth for 2024 was unrevised at 1.1%, although changes to the quarterly path of growth meant GDP growth for the year to the end of June 2025 was revised up to 1.4% from 1.2%.

Adjusting for a rising population, largely driven by high levels of immigration, GDP per head was up 0.9% in the year to the end of June after being stagnant in 2024.

Britain's economy was the fastest growing among the Group of Seven large advanced economies in the first half of this year.

But some of that expansion was due to one-off factors - including a rush of exports before U.S. import tariffs took effect - and the Bank of England forecasts growth in 2025 overall will be a modest 1.25%.

"Looking ahead, the second half of the year will be tougher going than the first six months," Thomas Pugh, chief economist at accountants RSM UK, said.

He predicted quarterly growth of 0.2% for the remainder of the year as wage growth slowed and inflation looked set to rise to 4%, double the Bank of England's target.

"The wildcard is how much speculation about tax rises in the upcoming budget will dent consumer and business confidence," he said.

Tuesday's data showed the household savings ratio - sometimes viewed as a gauge of consumer worries about the future - edged up to 10.7% in the second quarter from 10.5% in the first quarter, while second-quarter business investment growth was revised up to an annual rate of 3.0% from an initial estimate of 0.1%.

The ONS pointed out very little growth in consumer spending and a slight fall in output for consumer-facing services, despite overall growth for the services sector.

Many economists expect Reeves will have to raise taxes by tens of billions of pounds in the budget on November 26, on top of an even bigger rise last year, to meet her deficit reduction goals.

The Office for Budget Responsibility (OBR) is likely to take a more downbeat view on future productivity and growth, and fiscal pressures have been aggravated by higher U.S. tariffs, increased borrowing costs and government U-turns on welfare cuts.

Small upward revisions to past years' productivity and growth in Tuesday's data - which now show the UK economy is 5.2% larger than before the COVID pandemic, compared to a previous 4.5% estimate - were unlikely to sway the OBR, said Paul Dales, chief UK economist at Capital Economics.

"The slightly stronger economy and slightly better news on productivity in recent years isn't going to save the chancellor from having to raise taxes in the budget," he said.

Britain's current account deficit in the second quarter also came in above all forecasts in a Reuters poll at 28.939 billion pounds ($38.9 billion), its widest in two years and equivalent to 3.8% of GDP, up from 2.8% in the first quarter of 2025.

The ONS said the widening primarily reflected increased dividends paid out to foreign investors in British assets.

Despite U.S. President Donald Trump's announcement of wide-ranging tariffs in April, Britain's overall global trade deficit was little changed in the second quarter at 2.8 billion pounds, or 0.4% of GDP.

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