FILE PHOTO: A drone view of the City of London, Britain's financial powerhouse in London, Britain June 19, 2025. REUTERS/Yann Tessier/File Photo

By David Milliken

LONDON (Reuters) -Britain's economy slowed less than expected in the second quarter of 2025 after a strong start to the year, despite the shock of U.S. trade tariffs and a weaker jobs market, offering some relief to finance minister Rachel Reeves.

Official figures published on Thursday showed gross domestic product grew 0.3% in the second quarter after growth of 0.7% in the first three months of 2025, above the 0.1% forecast by the Bank of England and a Reuters poll of economists.

Sterling rose slightly against the dollar after the data.

Thursday's figures from the Office for National Statistics showed British GDP fell 0.1% in May but rose 0.4% in June due to surprisingly strong growth across services, industrial output and construction.

"A modest rebound in June brought Q2 to a positive close - but today's figures confirm that the strong growth seen earlier this year was a one-off and underlying conditions remain fragile," said Ben Jones, lead economist at the Confederation of British Industry.

"With business costs mounting, the labour market cooling, investment intentions weakening and confidence generally subdued, the UK is walking a narrow path between resilience and stagnation," he added.

Some business leaders are worried that Reeves might announce further tax hikes in the budget later this year.

Business investment dropped by 4% in the second quarter although it was 0.1% higher than a year earlier.

Output in the second quarter overall was up 1.2% from the same period last year compared to a median forecast from economists for 1.0% growth.

Reeves has been keen to highlight that British economic growth in the first quarter of the year was the fastest in the Group of Seven large advanced economies and Thursday's data showed Britain in joint-second place with France in the second quarter.

Britain faces headwinds from ongoing global trade uncertainty due to increased U.S. import tariffs as well as a slowdown in hiring at home - partly reflecting higher employment taxes and a big increase in the minimum wage.

Last month the International Monetary Fund forecast Britain's economy would grow 1.2% this year and 1.4% in 2026 - slightly faster than the euro zone and Japan but slower than the United States and Canada.

(Reporting by David Milliken; Editing by William Schomberg and Kate Mayberry)