June 2025 monthly update

Read our June monthly update – a roundup of the latest financial news and economic headlines.

Bank of England holds interest rates but hints at summer cut

In a 6-3 vote, the Bank of England’s (BoE) Monetary Policy Committee (MPC) has decided to hold interest rates steady at 4.25%. While the central bank has signalled that they may still cut the cost of borrowing later in the year, economists do not expect this to manifest before August.[1]

Governor Andrew Bailey announced that interest rates “remain on a gradual downward path” though with the caveat that “the world is highly unpredictable.” The BoE is “sensitive” to events in the Middle East, such as the recent conflict between Israel and Iran—the latter being a major oil producer. This could drive up energy costs, and prices overall, impacting future rate decisions.[2] Regardless, financial markets predict that the MPC will reduce rates at its next meeting in August and once more, before the end of 2025, to 3.75%.

Following a 0.7% boost at the start of the year, the economy shrank by 0.3% in April. Vacancy rates have reduced to pre-pandemic levels while unemployment has increased and wage growth has slowed. As such, this indicates significant cooling in the outlook for GDP or national output growth.[3]

Bailey further commented: “in the UK we are seeing signs of softening in the labour market. We will be looking carefully at the extent to which those signs feed through to consumer price inflation.” At 3.4% in the year to May, inflation remains above the BoE’s 2% target. It is expected to rise to 3.5% later in 2025 before decreasing to 2.1% in 2026.[4]

Energy bills could be cut for thousands of businesses

As part of the government’s new 10-year industrial strategy, over 7,000 businesses could become exempt from select green energy levies. From 2027, the businesses could see their energy bills cut by up to 25% due to the new British Industrial Competitiveness Scheme—which will reduce costs by up to £40 per megawatt-hour.[5]

The strategy concerns eight sectors where the UK is strong but has potential for further growth: financial services, life sciences, clean energy, creative industries, defence, digital, advanced manufacturing, and professional and business services. The scheme also vows to accelerate the time taken to connect new factories and projects to the energy grid.[6]

Furthermore, an estimated 500 of the most energy-intensive companies, including firms from the steel, chemical, and glassmaking industries, will also have their network charges reduced. Through the British Industry Supercharger scheme, these firms already receive a 60% discount that will rise to 90% in 2026.[7]

“This industrial strategy marks a turning point for Britain’s economy and a clear break from the short-termism and sticking plasters of the past,” stated Prime Minister Keir Starmer. During an “era of global uncertainty”, he believes the plan will provide “the long-term certainty and direction British businesses need to invest.”[8]

Chancellor to cut Cash ISA allowance

Chancellor Rachel Reeves is expected to announce a reduction of the £20,000 tax-free cap on Cash ISAs in her upcoming Mansion House speech. This is in an effort to encourage savers to invest in London-listed firms instead. According to the policy’s advocates, the £300bn pool would not only boost Britain’s capital markets but could also possibly improve returns over the long run.[9]

Although, a survey by stockbroker firm AJ Bell found that only one in five savers would invest in the stock market if the limit was cut. The Telegraph also reports that industry experts have condemned the idea on the basis that it would “damage incentives for long-term investment.”[10]

“Cash ISAs are often a first port of call when people are starting out, and they’ll often gradually move over into investments as they find their feet. If the speculation is accurate, it means they’ll have less available to transfer into stocks and shares ISA – effectively reducing investments rather than boosting them,” commented Sarah Coles, Head of Personal Finance at Hargreaves Lansdown.[11]

It is not yet known what new figure the government will assign to Cash ISAs. A Treasury official has confirmed, however, that they are “looking at options for reforms to Isas that get the balance right between cash and equities.”[12]