London Daily

Focus on the big picture.
Wednesday, Oct 01, 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
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
Nvidia Pledges Up to $100 Billion Investment in OpenAI to Power Massive AI Data Center Build-Out
U.S. Signals ‘Large and Forceful’ Support for Argentina Amid Market Turmoil
Nvidia and Abu Dhabi’s TII Launch First AI-&-Robotics Lab in the Middle East
Vietnam Faces Up to $25 Billion Export Loss as U.S. Tariffs Bite
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Indonesia Court Upholds Military Law Amid Concerns Over Expanded Civilian Role
Larry Ellison, Michael Dell and Rupert Murdoch Join Trump-Backed Bid to Take Over TikTok
Trump and Musk Reunite Publicly for First Time Since Fallout at Kirk Memorial
Vietnam Closes 86 Million Untouched Bank Accounts Over Biometric ID Rules
×