The UK Economy at a Glance: Autumn 2025

Economic headlines thrive on sensationalism. But the reality is often far more balanced. 

Around the world, populist politics often drag on growth through debt, protectionism, and weaker institutions, and the UK is not immune to political missteps. Government communication is poor, debt is high, and broad tax cuts are off the table. 

Yet there are reasons for optimism: infrastructure spending is rising, SMEs remain resilient, and the data signals steady, if unspectacular, growth.

Roger Martin-Fagg’s September 2025 economic update cuts through the noise with a behavioural lens on how money really flows. Here are a few snapshots from the report.

The UK snapshot: Optimism with caveats

Looking at the UK economy, a “visitor from Mars,” as Roger puts it, would see much to be positive about:

• Money supply is growing at 4%, consistent with steady GDP expansion (1.5–2%).
• Investment spending is at 18% of GDP, right in line with the average since 1950.
• Household incomes are holding steady, with the average gross income at £55.2k and the average tax take of 29% of income.

But the details matter:

• Per capita income hasn’t grown since 2019, partly due to immigration inflows.
• Households are saving 12% of after‑tax income (double historic norms), reflecting a combination of fear and ageing.
• Inflation is ticking back up, with core measures 3.6–4.2%. While food inflation is likely to hit 6% by year‑end as a result of supply shortages and inevitable price increases.
• Bank Rate is unlikely to fall further, and fixed‑rate mortgage costs could tick up 0.25%.
• Middle‑income households are feeling squeezed, with the first decline in disposable cash in two years, while lower-income families experienced a spending power slump of 11%.
• Retail sales volumes remain volatile, with June posting just a 1.8% increase on a year earlier.
• Vacancies are falling as costs rise and AI adoption accelerates, while those with AI skills now command a 10% salary premium.

Yet, SMEs remain adaptive. 

Lloyds’ August survey shows businesses’ confidence in their trading prospects is at its highest since 2014, with retail confidence at a five-month high and manufacturing confidence at its highest for ten years.

The US picture: Mixed signals

Across the Atlantic, US GDP looks stable at 2.8%, but the picture is mixed.

Populism tends to slow growth through debt, protectionism, and weaker institutions. All of which are present in the US today. This signals potential softness ahead.

• Unemployment: Slightly higher due to government layoffs, but still under 5% (which is defined as full employment).
• Farm stress: Commodity prices are back at 2018 levels, while input costs are up 30%, creating a risk of defaults.
• Tariffs: US tariffs average 18% vs. 3% globally, adding volatility to trade flows.
• Policy risk: International firms are pledging US investment, but uncertainty remains on delivery.

Finally, Roger warns that while agriculture is a small share of US GDP, widespread Midwest farm bankruptcies could spark a financial crisis reminiscent of the 1980s savings-and-loan collapse.

Where UK SMEs should focus now

Roger’s advice remains clear: Focus on what you can control.

• Expect steady but uneven UK growth (~1.4% for 2025).
• Build in resilience against sticky inflation.
• Embrace AI adoption, budgeting for the skills premium.

Download the full Economic Update September 2025 here.

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