London Daily

Focus on the big picture.
Wednesday, Oct 22, 2025

Fragile state of UK economy scrutinised as nation mourns

Fragile state of UK economy scrutinised as nation mourns

GDP, inflation and retail sales figures due to be released over next few days
The fragile state of Britain’s economy will be underlined this week by official figures showing a renewed slump in consumer spending amid soaring living costs, before a possible slowdown in activity during the national period of mourning after the death of Queen Elizabeth II.

City economists are forecasting a further rise in inflation to 10.2% in August when official figures are published on Wednesday, as the rising price of a weekly shop and sky-high energy bills add to the financial pressure on struggling households. This would mark a modest uptick from the July reading of 10.1%, which was the first time the consumer prices index had risen above 10% since the early 1980s.

The figures come after the Bank of England delayed a decision over a further rise in interest rates from the current level of 1.75% this week, in a mark of respect for the Queen. With businesses, financial institutions and unions cancelling or pushing back major events amid the national period of mourning, the central bank’s rate-setting monetary policy committee will wait until 22 September to act.

Over the weekend it was confirmed that the Queen’s funeral on Monday 19 September will be a bank holiday. While providing an opportunity for the public to pay their respects, the event could bring mixed blessings for businesses.

Rail industry leaders said travel to and from London would be “extremely busy”, urging mourners going to the capital to plan their journeys in advance.

Extra bank holidays can provide a boost to retail sales and hospitality spending. However, additional bank holidays have also led to a fall in monthly output for the economy as a whole, with businesses and factories closing their doors early. Official figures have shown a drop in monthly gross domestic product (GDP) for previous one-off bank holidays, including the Queen’s golden and diamond jubilees in 2002 and 2012 respectively.

Simon French, chief economist at the City broker Panmure Gordon, said one-off bank holidays in 2002, 2012 and earlier this year had lowered economic output by at least £2bn. “There are few parallels for this moment and that makes forecasting particularly difficult,” he told the Sunday Times. “We may not simply be talking about an extra bank holiday. There could be a prolonged period of national mourning.”

Government guidance published last week encourages companies to consider cancelling or postponing events during the period of mourning, especially on the day of the state funeral. However, there was no obligation to suspend business, with the decision at each firm’s discretion.

None the less, on Friday, some retailers temporarily shut their doors, and many events including conferences and sports fixtures due to be held this week have been postponed. Taken together, this suspension of normal business and cultural life could weigh on an already gloomy economic picture.

Households have begun reining in their spending in response to soaring prices for basic essentials, with the City braced for figures confirming a drop in August retail sales in Great Britain when the Office for National Statistics publishes its latest monthly data later this week. Economists polled by Reuters expect a fall of 0.4% on the month, reflecting the downturn in wider economic activity as Britain drifts towards a lengthy recession.

Last week the government set out plans to freeze energy bills at an average of £2,500 a year for two years, as part of a package of support for homes and businesses that marks one of the biggest government interventions since the financial crisis. In her first major act as prime minister, Liz Truss said its energy price guarantee would “give people certainty on energy bills, curb inflation and boost growth”.

Economists believe the measures could prevent inflation from rising much further than current levels while helping to lessen the impact of recession. However, the Bank is still expected to keep raising interest rates amid the risk of high inflation becoming entrenched, and as the pound comes under pressure on global financial markets on the back of speculation over the cost of Truss’s tax and spending plans.

Figures released on Monday are expected to show that economic activity recovered in July after June’s fall, when the platinum jubilee long holiday weekend weighed on growth. After June’s 0.1% drop in UK GDP, City economists predict a monthly rise of 0.4% in July, while warning that this will represent a temporary respite amid wider pressure on businesses and households.

“July GDP should be disappointing,” said Klaus Baader, an economist at the French bank Société Générale. “Retail sales are likely to show renewed weakness. Inflation probably only edged up in August, but recently all the surprises have been to the upside, so we should be prepared for another.”
Newsletter

Related Articles

0:00
0:00
Close
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Nicolas Sarkozy begins five-year prison term at La Santé in Paris
Japan stocks surge to record as Sanae Takaichi becomes Prime Minister
This Is How the 'Heist of the Century' Was Carried Out at the Louvre in Seven Minutes: France Humiliated as Crown with 2,000 Diamonds Vanishes
China Warns UK of ‘Consequences’ After Delay to London Embassy Approval
France’s Wealthy Shift Billions to Luxembourg and Switzerland Amid Tax and Political Turmoil
"Sniper Position": Observation Post Targeting 'Air Force One' Found Before Trump’s Arrival in Florida
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
Windows’ Own ‘Siri’ Has Arrived: You Can Now Talk to Your Computer
Thailand and Singapore Investigate Cambodian-Based Prince Group as U.S. and U.K. Sanctions Unfold
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
Chinese Tech Giants Halt Stablecoin Launches After Beijing’s Regulatory Intervention
Manhattan Jury Holds BNP Paribas Liable for Enabling Sudanese Government Abuses
Trump Orders Immediate Release of Former Congressman George Santos After Commuting Prison Sentence
S&P Downgrades France’s Credit Rating, Citing Soaring Debt and Political Instability
Ofcom Rules BBC’s Gaza Documentary ‘Materially Misleading’ Over Narrator’s Hamas Ties
Diane Keaton’s Cause of Death Revealed as Pneumonia, Family Confirms
Former Lostprophets Frontman Ian Watkins Stabbed to Death in British Prison
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
Outsider, Heroine, Trailblazer: Diane Keaton Was Always a Little Strange — and Forever One of a Kind
Dramatic Development in the Death of 'Mango' Founder: Billionaire's Son Suspected of Murder
Two Years of Darkness: The Harrowing Testimonies of Israeli Hostages Emerging From Gaza Captivity
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
HSBC Confronts Strategic Crossroads as NAB Seeks Only Retail Arm in Australia Exit
U.S. Chamber Sues Trump Over $100,000 H-1B Visa Fee
Shenzhen Expo Spotlights China’s Quantum Step in Semiconductor Self-Reliance
China Accelerates to the Forefront in Global Nuclear Fusion Race
Yachts, Private Jets, and a Picasso Painting: Exposed as 'One of the Largest Frauds in History'
Australia’s Wedgetail Spies Aid NATO Response as Russian MiGs Breach Estonian Airspace
McGowan Urges Chalmers to Cut Spending Over Tax Hike to Close $20 Billion Budget Gap
Victoria Orders Review of Transgender Prison Placement Amid Safety Concerns for Female Inmates
U.S. Treasury Mobilises New $20 Billion Debt Facility to Stabilise Argentina
French Business Leaders Decry Budget as Macron’s Pro-Enterprise Promise Undermined
Trump Claims Modi Pledged India Would End Russian Oil Imports Amid U.S. Tariff Pressure
Surging AI Startup Valuations Fuel Bubble Concerns Among Top Investors
Australian Punter Archie Wilson Tears Up During Nebraska Press Conference, Sparking Conversation on Male Vulnerability
Australia Confirms U.S. Access to Upgraded Submarine Shipyard Under AUKUS Deal
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
Brands Confront New Dilemma as Extremists Adopt Fashion Labels
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Erika Kirk Delivers Moving Tribute at White House as Trump Awards Charlie Presidential Medal of Freedom
British Food Influencer ‘Big John’ Detained in Australia After Visa Dispute
ScamBodia: The Chinese Fraud Empire Shielded by Cambodia’s Ruling Elite
French PM Suspends Macron’s Pension Reform Until After 2027 in Bid to Stabilize Government
Orange, Bouygues and Free Make €17 Billion Bid for Drahi’s Altice France Telecom Assets
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
Bessent Accuses China of Dragging Down Global Economy Amid New Trade Curbs
U.S. Revokes Visas of Foreign Nationals Who ‘Celebrated’ Charlie Kirk’s Assassination
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
×