Economic Review – July 2025

UK economic output shrank for the second month in May, driven by weakness in manufacturing and construction Inflation rose unexpectedly to 3.6% in June, complicating the Bank of England’s rate-cut considerations Labour market shows signs of cooling, with falling vacancies and slowing wage growth amid economic uncertainty 

UK economy still struggling to expand  

Figures published last month by the Office for National Statistics (ONS) showed the UK economy unexpectedly shrank in May, while more recent survey evidence suggests output remained lacklustre at the start of the third quarter. 

According to the latest official statistics, economic output fell by 0.1% in May, a second successive monthly decline following April’s 0.3% contraction. This disappointing performance, which was driven by a drop in output across the manufacturing and construction sectors, defied analysts’ expectations for a small monthly expansion.  

The data did though show that the economy grew by 0.5% across the three months to May. ONS noted that the second quarter as a whole will still see some growth if June’s monthly reading is flat or better and the previous two months’ figures are not revised downwards. However, while most economists are not forecasting a second-quarter contraction, they are now predicting a weaker growth profile than previously envisaged for the April–June period. 

Preliminary figures from the latest S&P Global UK Purchasing Managers’ Index (PMI) also point to relatively sluggish growth in July, with its headline growth indicator falling to 51.0 last month. While this leaves the index above the 50.0 threshold denoting growth in private sector output, it does imply a relatively weak growth trajectory, which S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said reflected both domestic headwinds linked to “the ongoing impact of policy changes announced in last autumn’s Budget” and “the broader destabilising effect of geopolitical uncertainty.” 

Mr Williamson added, “The flash UK PMI survey for July shows the economy struggling to expand as we move into the second half of the year. Output growth weakened to a pace indicative of the economy growing at a mere 0.1% quarterly rate, with risks tilted to the downside in the coming months.”  

Surprise rise in headline inflation rate 

Although the latest set of consumer price statistics did reveal an unexpected jump in UK inflation, economists still typically expect Bank of England (BoE) policymakers to sanction another interest rate cut after their next scheduled meeting during the first week of August. 

Data released last month by ONS showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – rose to 3.6% in June. This was up from 3.4% the previous month and left the headline inflation rate at its highest level since January 2024. 

ONS noted that the increase was primarily driven by higher transport costs, particularly in relation to motor fuel, air fares and train tickets. Other notable upward contributions came from both the food and non-alcoholic drink sector, which recorded its largest rise in prices since February 2024, and the clothing and footwear sector.  

This latest increase in price pressures will undoubtedly create a dilemma for policymakers when the BoE’s Monetary Policy Committee (MPC) convenes for its August meeting. Last month, however, Bank Governor Andrew Bailey did reiterate his belief that the path of interest rates remains downwards, adding that the Bank was prepared to make larger cuts if the jobs market shows signs of slowing down. 

Despite last month’s inflation surprise, most analysts expect that recent weak economic growth data and signs of a cooling labour market will persuade the BoE to cut rates this month. Indeed, a recent Reuters survey found that over 80% of economists think the Bank will sanction two more quarter-point reductions this year, which would leave Bank Rate at 3.75% by the end of December. And the MPC is widely expected to announce the first of those cuts after its next meeting on 7 August.  

Markets  

Global markets posted mixed results in July as investors weighed inflation data, interest rate policy and geopolitical developments.  

In the UK, the FTSE 100 made headlines mid-month by breaking through the 9,000 barrier for the first time, closing July on 9,132.81, a gain of 4.24%. This performance was driven in part by strong earnings in the banking and mining sectors. The mid-cap FTSE 250 also rose, up 1.56% to 21,962.83, while the smaller-cap FTSE AIM slipped by 1.19% to end July on 761.50. 

The US Federal Reserve held interest rates steady in a 92 vote, at a range of 4.25% – 4.50% at its July meeting, with two governors dissenting and signaling caution amid easing growth and persistent inflation risks. The Dow Jones closed July on 44,130.98, a minimal rise of 0.08% in the month, while the tech-orientated NASDAQ closed the month up 3.70% on 21,122.45.  

European equities were muted, with the Euro Stoxx 50 rising just 0.31% to 5,319.92. In Asia, Japan’s Nikkei 225 gained 1.44% to close the month at 41,069.82.  

On the foreign exchanges, the euro closed the month at €1.15 against sterling. The US dollar closed at $1.32 against sterling and at $1.14 against the euro.  

On the commodities front, Brent Crude closed July at around $71 a barrel, registering a near 6% monthly gain. However, oil prices dipped toward month-end amid uncertainty surrounding US trade policy and expectations of increased output from OPEC+. Gold prices climbed 1.26% over the month, finishing near $3,347 per troy ounce. 

More signs of cooling in the jobs market 

The latest batch of labour market data revealed fresh evidence of a softening in the UK jobs market with pay growth slowing, employee numbers down and a further fall in the overall level of job vacancies. 

ONS statistics released last month showed that the number of payrolled employees dropped by a provisional 41,000 in June following a 25,000 decline in May. There was also another fall in the estimated number of job vacancies, with 56,000 fewer reported in the April–June period compared to the previous three months; this took vacancies down to a 10-year low, excluding the plunge witnessed during the pandemic. 

The data release also revealed a slowdown in wage growth with average weekly earnings, excluding bonuses, rising at an annual rate of 5.0% in the three months to May, down from 5.3% in the previous three-month period. This represents the slowest rate of pay growth since the second quarter of 2022. 

Survey evidence also points to a more recent cooling. The latest KPMG and REC jobs survey, for instance, recorded the sharpest increase in the number of people available for work since the pandemic, while last month’s PMI data showed staffing numbers are now decreasing at the fastest rate since February. 

Summer sunshine boosts retail sales 

Last month’s official retail sales statistics revealed a partial rebound in sales volumes during June, although the rate of growth was lower than most economists had been expecting. 

The latest ONS figures showed that retail sales volumes grew by 0.9% in June. While this does represent a bounce back from May’s downwardly revised plunge of 2.8%, the rise did come in below analysts’ expectations with the consensus forecast from a Reuters poll of economists predicting an increase of 1.2%.  

ONS Senior Statistician Hannah Finselbach said the warm weather in June had helped boost sales, with supermarkets reporting “stronger trading and an increase in drink purchases”, while fuel sales were also up as “consumers ventured out and about in the sunshine.” Ms Finselbach did, however, add, “Looking at broader trends, retail sales are up slightly across the latest quarter but are down when compared with pre-pandemic levels.” 

Evidence from the latest CBI Distributive Trades Survey also suggests that sales volumes may have struggled in July with retailers noting that ‘elevated price pressures’ and ‘economic uncertainty’ continued to weigh on household demand. The survey also found that retailers expect sales volumes to fall short of seasonal norms in August as well.  

All details are correct at the time of writing (01 August 2025) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission. 

News in Review

UK–India trade deal slashes tariffs and is set to boost the UK economy by £4.8bn annually Vehicle production hits lowest H1 level since 1953, despite a slight rise in electric car output Public borrowing rose to £20.7bn in June, putting pressure on potential tax increases  

After more than three years of negotiations, Britain has sealed a trade deal with India which is set to boost the economy by £4.8bn a year. The agreement includes reduced tax on Indian exports such as cars, clothing, food and jewellery. UK exports with lower tariffs include medical devices, aerospace parts, luxury cars, gin and whisky.  

Sir Keir Starmer and Indian Prime Minister Narendra Modi signed the agreement at Chequers last week.  It is the biggest trade deal that Britain has made since Brexit and is one of India’s most significant agreements to date.  

The UK already imports £11bn in goods from India. In the long run, the deal is expected to boost bilateral trade by £25.5bn per year. On average, tariffs for UK exports to India will go down from 15% to 3%. Levies on whisky and gin shipped to India will be cut in half from 150% to 75%, dropping further to 40% by 2035. This will give the UK the edge over international competitors selling goods to India.   

The agreement is expected to create 2,200 jobs in Britain as Indian companies will expand operations in the UK, while British firms secure more business opportunities in India. Also, there is a reciprocal agreement that Indian staff in Britain will be exempt from National Insurance contributions and vice versa. Labour’s opponents have expressed concern that this will undercut British workers, however Business Secretary Jonathan Reynolds refuted this. 

Commenting on the deal, Starmer said, “We’re sending a very powerful message that Britain is open for business.” Prime Minister Modi said, “This isn’t merely paving the way for economic partnership but is also a blueprint for our shared prosperity.”  

Vehicle manufacturing declines in H1  

The automotive sector is under pressure, with UK vehicle production in H1 falling to the lowest level since 1953, not including during the pandemic. According to the Society of Motor Manufacturers and Traders (SMMT), total vehicle manufacturing declined by 11.9% in the first six months of the year. Car output fell by 7.3%, although electric car production increased by 1.8%. Meanwhile, van output dropped by 45%, partly due to the closure of Vauxhall’s van plant in Luton. Uncertainty over US tariffs caused production to slow; however, there was a small rise in vehicle manufacturing in June after the UK and US agreed to reduce tariffs on British car exports from 27.5% to 10%.  

Mike Hawes, SMMT Chief Executive, commented on the figures, “Global economic uncertainty and trade protectionism have taken their toll on automotive production across the globe, with the UK no exception. The figures are not, therefore, unexpected but remain very disappointing. However, there are foundations for a return to growth.” 

UK borrowing moves higher 

Figures from the Office for National Statistics (ONS) show that, in June, borrowing hit the second-highest figure since monthly records began in 1993. The public sector spent significantly more than it received in tax income, causing borrowing to reach £20.7bn, up £6.6bn when compared to June 2024. Interest payments on government debt were £16.4bn, nearly double the £8.4bn recorded the previous year. This adds pressure to Chancellor Rachel Reeves, with many experts predicting an increase in taxes in the Autumn Budget.  

Consumer confidence falls 

GfK’s Consumer Confidence Index fell by one point to -19 in July. The index measures consumer attitudes towards the state of the economy and their willingness to spend. It found that the expectations for the general economic situation over the next 12 months decreased to -29, down one point from June and 18 points lower than July 2024.  Meanwhile, the Savings Index increased to 34, up 7 points on the previous month and the highest level since November 2007. This suggests that consumers are cautious about what’s next for the economy.  

Consumer Insights Director at GfK, Neil Bellamy, said, “The key measures on personal finances, the economy and purchase intentions are flat in July, and many will conclude that consumers are in a cautious wait-and-see mood. But the data suggests that some people may be sensing stormy conditions ahead.” 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

 All details are correct at time of writing (30 July 2025) 

How the ‘great wealth transfer’ impacts you

Baby boomers hold over half of the UK wealth and should start legacy planning now Gen X can benefit from early financial advice to simplify future decisions and manage inherited wealth Millennials are motivated to build wealth and should start planning early to prepare for what’s ahead 

The UK’s ‘great wealth transfer’ will see an estimated £5.5trn to £7trn passed down the generations in the next 30 years. As money, property and assets are passed on through inheritance, gifts and estate transfers, it is important to understand what this will mean for you. 

“How can I secure my legacy?” 

Baby boomers (born 1946–1964) control more than half1 of the UK’s wealth. Mostly, they are financially comfortable, though may be worried about their children or grandchildren. The key is to start the conversation with family members early. This means taking a proactive approach to financial planning – securing your legacy will bring peace of mind. 

“How can I save time?” 

The first beneficiaries of the great wealth transfer are likely to be Generation X (born 1965–1980). Typically, this group is time poor, with a mortgage and multiple dependants to look after. For Gen X, thinking about the great wealth transfer might not be a priority, but seeking advice now with retirement, general financial planning and starting conversations with your parents, can save you a lot of time and stress later. Advice to simplify your decisions, reduce debt, invest wisely, understand taxes, tune into estate planning and prioritise long-term goals to manage inherited wealth responsibly, and with confidence, will prove advantageous. 

“How can I achieve my financial goals?”  

Millennials (1981–1996) typically have lower wealth levels than older generations but are highly motivated to improve their financial future. To build confidence and prepare a solid financial plan for the next 30 years (and beyond), it is a good idea to start working with us early, so you’re well-equipped to deal with what’s coming your way. 

Talk it through 

Whatever life stage you’re at, planning early and seeking advice will help you embrace the future with confidence. We can help you navigate the great wealth transfer. 

1Vanguard 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments. A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up. 

Investors warned as cloning scams surge

Nearly a quarter of brand cloning scams succeed, costing investors £2.7m in H2 2024 AI is fuelling more convincing scam tactics that mimic real firms Verifying legitimacy before investing is more important than ever 

Cloning scams are now the top fraud threat to people wanting to invest, a new study shows1. The Investment Association (IA) said there were 478 cases of firms being impersonated by fraudsters in the second half of 2024 alone. 

Nearly a quarter of these scams succeeded, costing investors £2.7m. Advances in artificial intelligence are likely to make future cloning attempts even more convincing and sophisticated in nature. 

These brand cloning scams involve criminals creating a nearly identical duplicate of a genuine website or email, or creating a fake WhatsApp group, using a reputable company’s logo and brand, to trick people into parting with their money, thinking they’re making a genuine investment. 

Regulatory and Financial Crime Expert at the IA, Adrian Hood, commented, “Criminals will use a variety of means to trick people into parting with their money… That’s why we’re urging consumers to stay vigilant. With cloning scams topping the list of threats, consumers should double check whether websites or emails are legitimate before transferring any money. The growth of AI is likely to see increasingly sophisticated scams, with criminals better able to mimic legitimate firms.” 

1The Investment Association, 2025 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

Engaging with your pension – knowledge gaps revealed

Most UK adults lack essential knowledge about their pensions and how they’re invested A significant number don’t know their State Pension entitlement or how it’s calculated Many want to consolidate pensions but don’t know how to start 

New research1 has shone a light on the extent of pension knowledge gaps among UK adults. While 53% of people believe they are knowledgeable about pensions, only 35% can correctly identify a defined benefit scheme and 34% understand what a defined contribution scheme is. Additionally, 20% are unaware of their own pension type and 57% do not realise that the government contributes to pensions through tax relief. 

While over half (55%) are unaware how their pension is invested, 81% of respondents haven’t altered their investment strategy, with a quarter citing it’s because they don’t know enough, or didn’t realise they could. 

Almost 70% of people in the UK have between one and five pension pots, while 20% are unaware how many they actually have. Nearly a third (35%) of those who know where their pensions are, don’t know how to access them. While only 15% have consolidated their pensions, 46% are interested in doing so but are unsure what steps to take to achieve it. 

And the State Pension? 

Half of UK adults don’t know how much they’ll receive from their State Pension and 32% are unaware of the age they’ll qualify2. Over half (51%) don’t know how much the full new State Pension is – it’s currently £11,973 a year – while 52% don’t know how to find out their entitlement and 34% are unaware that National Insurance contributions determine the amount they’ll receive. 

With your pension such a major part of your retirement strategy, you really can’t afford not to be on the ball. Knowledge is crucial. We can support you to make well-informed decisions – your future-self will thank you. 

1Aviva, 2025, 2Standard Life, 2025 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning. 

News in Review

UK inflation unexpectedly rose to 3.6% in June, reducing hopes of imminent interest rate cuts Retail sales showed strong annual growth of 3.1%, led by food sales and resilient online spending Unemployment hit 4.7% and vacancies continued to fall, signalling persistent labour market softness and caution 

“This surprise uptick in CPI to 3.6% is a disappointment for households and businesses” 

The latest Consumer Prices Index (CPI) data from the Office for National Statistics (ONS) has shown an unexpected rise of 3.6% in the 12 months to June, up from 3.4% in the 12 months to May. This annual CPI rate is the highest recorded since January 2024, with a poll of economists predicting the rate would remain unchanged at 3.4%. 

During June, clothing, food, air and rail fares ticked up, while fuel prices tempered. Transport was the main driver of higher inflation, but upward contributions were partially offset by housing and household services. Food prices increased annually by 4.5%, the highest rise since February 2024, due to key ingredients going up in cost.  

The new data has dampened expectations for further cuts in Bank Rate. The rate of inflation remains notably higher than the target of 2%, so the Bank of England is expected to proceed with caution.  

Chief Economist at the Institute of Directors, Anna Leach said, “This surprise uptick in CPI to 3.6% is a disappointment for households and businesses. Services inflation, in particular, will concern the Bank – it had been expected to remain flat. With borrowing costs still high and economic growth stagnating, the UK is skirting dangerously close to stagflation.” 

Looking ahead to the next Bank Rate decision, due in early August, Ms Leach continued, “The MPC will need clear signs that wage growth is easing and second-round inflation effects are fading before it can justify another cut.” 

And in the US… 

The UK isn’t the only country feeling the effects of inflation. Across the pond, consumer prices rose monthly from 2.4% to 2.7% in June, according to the US Bureau of Labor Statistics. Increased housing and energy costs were the primary reasons for the increase. Trump’s higher tariffs are also likely to have contributed to prices going up, with the index for household appliances and supplies rising by 1%. It therefore seems unlikely that the Federal Reserve will reduce interest rates later this month.   

“Retail sales heated up in June” 

In June, UK retail sales increased annually by 3.1%, a sharp improvement on the 0.2% decline recorded in June 2024. Food sales led the way with a 4.1% annual increase, while non-food sales went up by 2.1%. The proportion of non-food items bought online held steady at 36.6%, remaining just below the 12-month average of 36.8%. 

Chief Executive of the British Retail Consortium, Helen Dickinson, noted, “The outlook is not all bright and sunny: retailers are watching government closely for details of the upcoming business rates reform.” She added, “If government wants to improve high streets and help local communities, they must ensure that no shop pays more under their new rates reforms.” 

Unemployment rate ticks higher 

Figures from ONS show that, between March-May 2025, the UK unemployment rate was 4.7%, the highest since June 2021. In April to June 2025, job vacancies fell for the 36th consecutive period, decreasing by 56,000 to 727,000. The ONS Vacancy Survey indicates that many employers may not be recruiting new staff, nor do they seem to be replacing workers when they leave. Meanwhile, in March to May, average weekly earnings were up 5% year-on-year, the weakest growth seen since April-June 2022.   

Wide regional property price variations 

Statistics from Zoopla have found that eight in ten UK homes have gone up in value by at least 5% since the pandemic. Moreover, a million properties have gone up by 50% or more, with most of these homes located in the North West, Yorkshire and the Humber, and Wales. Meanwhile, the south of England has only seen moderate price increases, with half of homes increasing by less than 20%. In the capital, where affordability remains a challenge, 13% of properties have dropped in value by 5% or more, primarily in expensive areas such as Kensington and Chelsea and Westminster.  

Richard Donnell at Zoopla commented, “Our latest analysis clearly shows there is no single housing market and that house price trends vary widely across the UK.” 

Unused pensions will face Inheritance Tax  

On Monday, the Government confirmed it is proceeding with its plans to include unused pension pots within Inheritance Tax (IHT) from April 2027 with the publication of draft legislation. Exemptions include death-in-service benefits from registered pension schemes and certain defined benefit or collective money purchase arrangements. 

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (23 July 2025) 

Residential Property Review – July 2025

City of London investment volumes are rising, with May hitting the highest deal count so far in 2025 Owner-occupier demand is increasing as mortgage costs undercut commercial rents by up to 37% Scottish commercial investment fell 20% in H1 2025, though hotels led performance and private buyers remained active 

A smoother end to 2025?  

The second half of the year should be smoother for the UK housing market, according to Knight Frank.  

The first six months of 2025 brought some uncertainties, with Trump’s trade tariffs, ongoing geopolitical conflict and Stamp Duty changes. However, things may be looking up.  

Buyer activity seems to be recovering after Stamp Duty thresholds reverted to higher levels in April. This initially caused a 37% decline in transactions; however, in May there was a smaller drop of 17%, suggesting that activity is picking up. Supply still outweighs demand, as the number of new homes for sale between January and May was 15% higher than the five-year average.  

Experts believe that there will be further cuts to Bank Rate this year, which would help boost the market. However, there are concerns that the government will announce more tax rises in the Autumn Budget to create financial headroom.  

Strong demand for new builds in key cities 

Property Inspect reported that demand for new builds remained stable in Q2 2025.  

New-build demand was 18.2% in quarter two, only 0.2% less than Q1. This stability is driven by strong performance in cities, with demand highest in Southampton, where over a third (35%) of new-build homes are sold subject to contract (SSTC). Portsmouth is second on the list with 28%, followed by Sheffield (20.6%), Glasgow (19.5%) and Bristol (19.1%).  

On the other hand, demand was weakest in Swansea, where only 1.1% of new builds were under offer. The Welsh city is joined at the bottom by Liverpool, where 3% of new homes were SSTC. Aberdeen saw the largest quarterly drop in interest, where demand fell by 10%.  

Commenting on the research, Siân Hemming-Metcalfe, Operations Director at Property Inspect, said, “Activity in many major cities highlights that buyers are still transacting, even in the face of higher price points”.  

Decline in property flipping 

The number of homes being flipped has dropped to the lowest level since 2013, according to Hamptons.  

Property flipping – buying homes to renovate and quickly resell – has become less common. In Q1 2025, only 2.3% of homes sold in London had been bought within the last year, a 3.6% annual decrease. Although the average gross profit from flipping a property rose this year to £22,000, it is still below the peak of £38,000 seen in 2022. This drop is likely due to a slowdown in house price growth.  

Flippers seem to be retreating from the South, with only 1.5% of homes in London resold within a year. In the capital, 23% of the average profit from flipping went towards Stamp Duty, which has likely been a deterrent for investors. Meanwhile, the North East is a popular spot, where flipped homes accounted for 4.7% of all sales in Q1.  

Sales stabilising but not yet recovering  

The latest report from the Royal Institution of Chartered Surveyors (RICS) suggests that the sales market is stabilising.   

Buyer demand is in positive territory for the first time since December 2024. The net balance for new buyer enquiries increased to +3% in June, significant progress when compared with -22% in May. The net balance for sales agreed also improved, rising from -25% and -28% in the two previous months to -3% in June. However, these figures suggest that buyer and seller momentum is stabilising, rather than recovering.   

As for the lettings market, tenant demand remained relatively flat in June, with a net balance of -2%. A quarter (24%) of those surveyed expected rents to rise in the next three months, down from 43% of respondents in May.   

RICS Head of Market Research and Analysis, Tarrant Parsons, commented, “Confidence in the market remains somewhat delicate, with economic uncertainty at both the domestic and global level still seen as a potential headwind. “ 

(All details are correct at the time of writing 16/07/25) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission

Commercial Property Market Review – July 2025

City of London investment volumes are rising, with May hitting the highest deal count so far in 2025 Owner-occupier demand is increasing as mortgage costs undercut commercial rents by up to 37% Scottish commercial investment fell 20% in H1 2025, though hotels led performance and private buyers remained active 

City investment market outlook 

The City of London investment market continues to show signs of recovery, according to property experts Savills.  

May saw the highest number of monthly deals so far this year, with nine transactions worth a total of £181.9m. The largest deal in May was a £47.5m transaction from Whitbread, who plan to convert 87,000 sq. ft of office space into a 400-bedroom hotel on the South Bank.  

At the end of May, the year-to-date volume was £1.62bn; although this is 24% lower than the five-year average, it is almost three times higher than 2024. Meanwhile, Savills’ City prime yield remains unchanged at 5.25% for the twenty-second consecutive month.  

Market conditions look promising for the rest of the year, following the Bank of England cut to Bank Rate in May which should help boost momentum. There is also a growing quantity of available stock, £1.1bn of which is currently under offer.  

More businesses buying their premises 

It has become cheaper for businesses to buy their premises instead of renting, a trend which has positively impacted commercial market performance.  

According to Rangewell, monthly mortgage payments can cost up to 37% less than commercial rents. Owning premises has therefore become an attractive concept, with businesses deciding to opt for stability and avoid rising rents. It also offers companies the opportunity to increase their overall assets. As a result, there has been an uptick in enquiries and completions for owner-occupier mortgages.  

Overall, demand remained steady in Q2 when compared with the previous quarter. The leisure and hospitality sector saw growth of 0.7%. Meanwhile, the retail sector accounted for over a quarter (27.8%) of the listed properties already sold in Q2, closely followed by offices (27.3%) and industrial units (26.2%). Specialist subsectors are also making the move to owner-occupied premises, in particular dental care and children’s day nurseries.  

A weaker H1 for Scottish commercial property 

Analysis from Knight Frank shows that investment in the Scottish commercial property market decreased by 20% in H1 2025.  

There was £750m of investment in the first six months of the year, notably lower than the five-year average of £925m. This decline is reflective of trends across the UK and is likely caused by geopolitical tensions and changing policies.  

Hotels were the strongest performing asset class for the first time in recent years, with £213m worth of transactions, followed by retail (£207m) and offices (£152m). The most active buyers were private investors, accounting for 40% of transaction volumes, while international investors made up a third (32%) of investment.  

Head of Scotland Commercial at Knight Frank, Alasdair Steele, commented, “In a volatile world, commercial property remains an attractive option for investors – and Scotland remains good value within the UK, which itself is widely seen as a safe haven from an international perspective.” 

South East and Thames Valley office update 

Research from Lambert Smith Hampton (LSH) shows Q1 take-up of offices in the South East hit a three-year high of 1.1 million sq. ft.  

It is expected that Q2 will see an additional take-up of 900,000 sq. ft, which would make for the strongest six-month total since H2 2021. Leasing activity in the region has been boosted by resilient demand and limited supply of prime space. There has also been a resurgence of larger transactions, with 14 deals above 20,000 sq. ft between January and March. In the same period in 2024, there were only six of these larger deals.   

Senior Director at LSH, Andrew Hodgkinson, noted that a lack of prime options has created “fresh opportunity for those brave enough to capitalise on this shortfall – especially in aspirational locations with infrastructure and affordability advantages, but a lack of prime supply, notable examples including Maidenhead, Milton Keynes and Woking.” 

All details are correct at the time of writing (16 July 2025) 

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission 

News in Review

According to the Bank of England, global financial uncertainty is increasing, but the UK banking system is strong and well-capitalised The UK economy unexpectedly contracted in May, raising concerns about momentum following strong Q1 growth In her Mansion House speech, the Chancellor confirmed no immediate changes to Individual Savings Account (ISA) allowances or structure   

“Our focus remains on maintaining financial stability” 

Key findings from the Bank of England’s (BoE’s) Financial Stability Report, released last week, have shown that the global risk outlook has become increasingly uncertain following recent geopolitical shocks which have resulted in heightened volatility in financial markets. 

Since the last report in November, global vulnerabilities have increased, with elevated risks to growth and inflation, and ongoing US trade negotiations and the conflict in the Middle East weighing. Weaker growth prospects and uncertain interest rate paths have added to global sovereign debt pressures. Meanwhile, rising geopolitical tensions have driven a surge in global cyber attacks, which could amplify financial stress, according to the report. The Financial Policy Committee is urging global cooperation to build resilience, share best practices and improve preparedness to combat cybercrime. 

The report outlines that despite this challenging environment, UK households and businesses remain broadly resilient; the UK banking system is well-capitalised and robust, enabling it to continue supporting the real economy, even during periods of financial stress. 

Speaking at the accompanying press conference, Andrew Bailey, BoE Governor said, “Risks to the global outlook remain high… household and corporate borrowers remain resilient in aggregate and the UK banking system remains in a strong position to support them.”  

He concluded, “Our focus remains on maintaining financial stability and ensuring the resilience of the financial system in an environment with increased geopolitical uncertainty and unpredictability, which underpins sustainable economic growth.” 

UK GDP unexpectedly contracts in May 

According to the Office for National Statistics (ONS), it’s estimated that the UK economy contracted 0.1% in May 2025, following a decline of 0.3% in April. The drop was mainly driven by manufacturing output, which decreased by 1.0% over the period. The wholesale and retail trade sector also had a weak performance, accounting for the largest negative contribution at the subsector level.   

The fall in economic output has surprised many experts, as gross domestic product (GDP) grew by 0.7% in Q1 of this year, making the UK the fastest-growing country in the G7. However, this is potentially short-lived as growth for Q2 is estimated to be between 0.1% and 0.2%. The disproportionate growth at the start of the year was likely due to manufacturers rushing to beat higher US tariffs, plus the race to complete property purchases before the Stamp Duty reforms.  

Housing market enters a more settled phase 

The housing market seems to be stabilising after a volatile period, according to the Royal Institution of Chartered Surveyors’ (RICS) Residential Market Survey. For the first time this year, the net balance for buyer demand has moved out of negative territory, increasing to +3% in June. Near-term expectations for sales volumes also had an uplift, with a net balance of +6%. However, survey respondents expect sales volumes to remain relatively flat over the coming year, with a net balance of +5%. 

The net balance for new instructions has fallen, dropping from +7% in May to +3% in June. This indicates a comparative slowdown in new listings; however supply remains fairly high.  

Across the UK, house prices still follow a negative trend, with the net balance staying at -7% in June. This trajectory is expected to continue in the short term, but a quarter (24%) of survey respondents anticipate house price increases over the next 12 months.  

Reeves signals stability in Mansion House Speech 

On the day the FTSE 100 broke through the 9,000 mark for the very first time, in her Mansion House address, Chancellor Rachel Reeves focused on continuity, avoiding major tax or savings announcements, saying, “I and this government remain committed to our non-negotiable fiscal rules.”  The main points from the speech included: 

  • No immediate changes to Individual Savings Account (ISA) allowances or structure, though she “will continue to consider further changes to ISAs” 
  • No new taxes on the banking sector, maintaining the current bank levy and surcharge 
  • A reaffirmation of support for the ‘Leeds Reforms’ – a wide-ranging package simplifying financial regulation, easing ringfencing rules and unlocking higher loantovalue mortgages.  

Here to help 

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have. 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. 

All details are correct at time of writing (16 July 2025) 

Summer pension round-up – managing your wealth

Nearly half of over-50s are worried about running out of money in retirement Many retirees withdraw pension lump sums impulsively, without understanding tax or long-term consequences Career progression, early retirement and smart planning shape your future pension outcome. 

With life moving fast, demands on our time and finances never-ending, it’s easy to push pensions down the priority list. Then there’s the ‘noise’ created by global geopolitics, economic challenges and their impact on markets and in turn your finances. Sometimes burying your head in the sand (preferably on a summer holiday) may seem like the most favourable option! 

When it comes to your finances, neither inertia nor acting in haste is recommended. In fact, making informed, strategic, confident decisions about your wealth has arguably never been more important. 

A decade on from pension freedoms: are savers making informed choices?  

Since pension freedoms were introduced in 2015, many over-55s have been accessing their pensions without understanding the tax implications or seeking advice. Research1 among over-50s has found that only four in ten had considered the tax implications of withdrawing taxable lump sums, and just 39% had taken financial advice. Also, while over half took the full 25% tax-free lump sum, many paid off debts or made the peculiar decision to move it into savings. Nearly one in five didn’t seek any guidance at all. With life expectancy on the rise, almost half of over-50s are worried about running out of money in retirement. 

‘Lottery effect’ puts pension pots at risk  

Many retirees risk running out of pension savings by their late 70s as a result of the so-called ‘lottery effect’ (where access to large sums prompts impulsive spending) likely to blame, according to a new study2. One in seven see their pension lump sum as a bonus and nearly half access it simply because they can. With the average life expectancy of a current 60-year-old in the UK sitting at 86, some retirees could be left with a shortfall between their retirement funds running out and the end of their life. 

With new rules likely to be introduced from 2027 regarding unused pensions becoming subject to Inheritance Tax (IHT), careful planning remains key to long-term retirement security. 

How career paths define your pension pot  

Research3 shows career progression significantly affects pension outcomes. Someone earning £25,000 at 22, with steady 3.5% annual pay rises, could retire at 68 with a £210,000 pension pot, while salary growth of 5% could boost this to £290,000. However, retiring as early as 58, for example, could reduce that pot to £176,000. While rapid career growth helps, burnout or early retirement can limit gains. Therefore, balancing ambitious career choices with wellbeing is critical. 

Time to focus on your pension? 

Whatever life stage you’re at, we’re here to help you make confident, informed decisions. Your pension deserves some airtime. 

1Royal London, 2025, 2L&G, 2025, 3Standard Life, 2025 

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.