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.
Growth takes a knock, but business as usual returning?
Our three economic indicators map a real economy rolling with the global trade tension reverberations. The UK’s slim growth prospects for 2025 are impacting businesses’ investment decisions, credit conditions and competitiveness. But this month’s data does at least suggest signs of a return to trend after April’s tariff and tax shocks.
In the latest Quarterly Economic Outlook, our Chief Economist, Tom Pugh, warned us that GDP growth is likely to take us on a rollercoaster ride this quarter and into next. The RSM UK Real Economy Barometer (based on the latest official GDP data) shows us at the start of this. Impressive Q1 growth in the real economy was replaced at the start of Q2 with a 0.5% shrinkage in April. Underlying momentum in the real economy does look positive overall and remains on track for 1.2% expansion.
The RSM UK Credit Impulse – a predictor of economic growth – saw new borrowing in May return after April’s decline. This was largely due to mortgage lending levelling out after March’s pre-April Stamp Duty hike bonanza. However, the flow of new credit into the economy stayed broadly flat as the 3-month average remained at 0.7% of GDP. More encouraging was the flow of new credit to businesses, increasing to 0.2% of GDP from 0.1% during this time, suggesting higher confidence.
Rounding out this picture of nascent sentiment recovery is the improvement in The RSM UK Financial Conditions Index (FCI) to almost its February level. The FCI rose to +1.2 at the end of June from +1.0 earlier in the month, driven by small gains in equities and less volatility, and bolstered by strong money markets.
Our next set of indicators, published in August, will articulate how UK businesses, consumers and financial markets continue to respond to uncertainty as government spending starts to flow through the real economy and the 90-day US tariff pause expires. Until then, sign up to receive our regular economic updates and read RSM UK Chief Economist Tom Pugh’s commentary of key datapoints, weekly Economic Voice briefings and UK Quarterly Economic Outlook.
Last updated: 02 July 2025
New lending to households on the single-month measure improved to 0.2% of GDP compared to the previous -0.3% contraction. The swing largely reflects the normalisation of mortgage borrowing. This surged to £13.8bn in March, then fell to -£0.8bn in April as higher stamp duty thresholds took effect. In May, mortgage debt borrowing rose by £2.8bn to £2.1bn as activity returned to more normal levels. This meant that the three-month average for the flow of new credit into the economy remained broadly flat at 0.7% of GDP. That said, the flow of credit to firms increased slightly to 0.2% from 0.1% on the three-month average, hinting at more positive business sentiment.
Credit impulse explained
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 %.
Last updated: 13 June 2025
Last month, growth in the real economy in the figures for March confounded expectations to come in at 0.9% q/q. That put it well on track for the 1.2% we forecast. This month, however, data for April shows a 0.5% shrinkage. The bulk of this contraction came from a 0.9% fall in manufacturing output as tariff front-running unwound. Services in the real economy also gave up some of March’s strong gains, falling -0.6%, as activity to beat various tax rises unwound in April. Construction provided some relief, growing by 0.9% m/m thanks to the sunniest April on record. Both the real economy and official GDP remain broadly on track to meet our expectation for a 1.2% expansion.
Real Economy Barometer explained
Real Economy Barometer explained
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 1.2%).
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.
Last updated: 02 July 2025
The RSM UK Financial Conditions Index (FCI) nudged up in June to +1.2 compared to +1.0 at the start of the month. This suggests more supportive credit availability, business growth and consumer spending environments.
Taking the FCI’s components in turn, equities continued quietly to regain lost ground, improving to +0.8 from +0.7, while bond markets were unchanged at +0.3 on this month compared to last. That said, corporate yield spreads fell to their lowest levels since February 2025, meaning a higher risk appetite among investors and more attractive debt refinancing options for businesses. Money markets (+1.4) also remained resilient. Foreign exchange markets stayed flat at 0 as sterling remained somewhat weak against the euro, despite recent strength against other currencies.
Overall, financial conditions have sustainably recovered any losses incurred from US tariffs and are only slightly below the February high of +1.3.
Financial Conditions Index explained
Financial Conditions Index explained
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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