RSM UK Real Economy Economic Indicators
Our three economic indicators focus on the data that matters to middle market businesses: financial conditions, credit availability and growth in the real economy.
02 May 2025
UK economy back on track – but for how long?
Our three economic indicators map a real economy springing back to life. Yet, growth is being tempered by significant uncertainty. This is impacting investment, credit conditions and the UK’s future competitiveness.
The RSM Real Economy Barometer (based on the latest official GDP data), shows the real economy rebounding from its previous shrinkage. Private sector businesses outperformed headline GDP growth, putting the UK back on our trajectory for a 1% expansion in 2025.
The RSM UK Credit Impulse – a predictor of growth – also posted a modest increase. Credit flowed mainly to consumers, which is consistent with our industry insights and 2025 outlook.
This would be better news for Chancellor Rachel Reeves and her Autumn Budget 2025 plans were it not for significant global trade disruption denting confidence.
New business lending slowed to its lowest level since October 2023. Tariffs and related uncertainties likely mean higher long-term interest rates: bad news for government borrowing, tax rise prospects, businesses and consumers.
The RSM UK Financial Conditions Index already shows tightening in the investment environment. A large downward shift in the FCI reflects the markets’ volatility since the start of April.
Our next set of indicators, published in June, will express how UK businesses, consumers and financial markets continue to respond to uncertainty. Until then, sign up to receive our regular economic updates and read RSM Economist Tom Pugh’s commentary of key datapoints, weekly Economic Voice briefings and UK Quarterly Economic Outlook.
- UK Credit Impulse
- UK Real Economy Barometer
- UK Financial Conditions Index
UK Credit Impulse
Private sector borrowing is still stimulating the UK economy. The latest three-month average increased modestly to 1% of GDP from 0.6%. Consistent with our analysis, it’s consumers who are driving growth, particularly on mortgage debt. The household component increased from 0.5% of GDP to just shy of 1%; the highest since June 2021. However, new lending to businesses slowed to its lowest level since October 2023, dropping from 0.1% of GDP to a touch over 0%. Overall, we expect this metric to remain subdued because of global uncertainty, despite any Bank of England cut to interest rates this month.
Measuring the UK’s economic momentum
The RSM Credit Impulse is a real-time snapshot of new credit flowing into the UK’s private sector.
As a gauge of future economic momentum, it tracks both household and business borrowing, offering middle-market businesses insight into the direction of future growth.
How to use The RSM Credit Impulse
The RSM Credit Impulse gives you the ability to anticipate changes in the economic landscape.
It outlines capital investment and consumer spending intentions as a proportion of GDP.
- Positive values are a sign of good credit flows, investment and consumer confidence.
- Negative values suggest a tightening credit environment and caution in spending and investment.
How we calculate The RSM Credit Impulse indicator
The RSM Credit Impulse uses data from the Bank of England for lending flows and the ONS for nominal GDP. The change in lending flows is then calculated and divided by quarterly GDP to give a %.
UK Real Economy Barometer
The real economy bounced back in February. It grew by 0.7%, outpacing the 0.5% in latest official GDP data. Growth was broad-based, with construction (0.4%), services (0.4%) and manufacturing (2.2%) all contributing. This big swing in manufacturing suggests additional consumer, order-book and inventory activity in anticipation of tariff announcements. It likely presages a more material slowdown in Q2 following the introduction of baseline and enhanced tariffs by the US, associated rising input costs and ongoing uncertainty.
Providing clarity for business leaders operating in the UK’s real economy
The Real Economy Barometer more accurately describes the economic landscape as experienced by middle-market businesses.
Focusing on the UK’s goods- and service-producing sectors, it filters out certain public-sector components from official GDP data to provide business leaders with actionable insights.
How to use The Real Economy Barometer
We can better understand where growth is coming from, the factors influencing this and what it takes in the coming months to meet growth forecasts by comparing data for real economy output with official UK GDP.
Every month, following the release of official UK GDP data, our economists calculate how the real economy – accounting for 79% of the UK economy – is performing against the:
- UK economy’s total output
- our growth forecast (currently 1%).
Negative values show shrinkage in the size of the economy and positive values show growth.
How we calculate The Real Economy Barometer indicator
The Real Economy Barometer strips out the impact of imputed rents, public administration, education, human health, residential care, social work, libraries and museums, and social clubs from official GDP data.
UK Financial Conditions Index
The Financial Conditions Index (FCI) for May depicts the aftermath of President Trump’s Rose Garden tariff announcements in the UK’s money, bond, equity and foreign exchange markets. The FCI currently sits at 0.2: well below its 13-week average of 0.9, but a recovery from its recent 0.0 nadir. While still positive, these more constricted financial conditions will weigh on growth because borrowing affordability and risk appetite have decreased. Money and bond markets are holding up fairly well. It’s volatile equity (-0.8) and foreign exchange markets (-0.3) impacting the FCI most.
A real-time gauge of financial stress
The RSM Financial Conditions Index (FCI) is a powerful metric that monitors the level of financial stress in the UK’s money, bond, equity and foreign exchange markets.
It offers near real-time insight into financial market movements, helping business leaders to gauge how shifts might impact the broader economy and its stability.
How to use The Financial Conditions Index
The FCI shows exactly how far current financial conditions diverge from historical norms.
This means we can understand if current financial conditions are supportive of business growth, investment and consumer spending, or not.
- Positive values indicate more accommodating financial conditions and easier credit availability – prerequisites for economic expansion.
- Negative values indicate tighter financial conditions, less credit availability and higher costs – dampeners for investment, confidence and growth.
How we calculate The Financial Conditions Index indicator
Items included in the composite RSM UK Financial Conditions Index are normalised by subtracting the mean and dividing by the standard deviation for each series. The FCI, as a Z-Score, indicates the number of standard deviations by which current financial conditions deviate from normal levels.
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