> The UK economy enjoyed its strongest quarterly growth in a year before the double blow of tax hikes and Donald Trump’s trade war. Gross domestic product rose 0.7% in the first quarter, an acceleration from the 0.1% increase at the end of 2024, the Office for National Statistics said Thursday. It was above the 0.6% expected by the Bank of England and private-sector economists. Output in March alone grew by 0.2%, instead of stagnating as economists had forecast. It suggests businesses and consumers were holding up a month before a huge tax hike hit employers and Trump was due to announce sweeping global tariffs. Services and construction both grew strongly, offsetting a sharp fall in manufacturing. The pound gained after the stronger-than-expected data, up 0.2% to $1.3289. Money markets trimmed bets on Bank of England interest-rate cuts slightly, pricing in 40 basis points more easing by the end of the year, which means one quarter-point cut is fully priced with around 60% chance of another.
> The pickup is a boost for Keir Starmer’s Labour government, which has struggled to get the economy motoring since winning power last summer. GDP per head — a key measure of living standards — expanded 0.5% in the first three months of 2025, bouncing back after two consecutive quarterly falls. However, economists are urging caution. The first quarter was aided by strong growth in February as factories ramped up production in an attempt get ahead of Trump’s highly anticipated tariffs by increasing exports to the US. Separate trade figures on Thursday showed exports to the US in the first quarter were the highest since the end of 2022 after a fourth consecutive monthly increase. Car manufacturers ramped up exports to the US in March, driving an increase in shipments of transport and machinery equipment.
> Moreover, the levies subsequently announced on April 2 were far worse than expected, and the blow to confidence is expected to keep weighing on the economy despite Britain and the US agreeing a deal on tariffs and a truce in the trade war between Washington and Beijing. PMI surveys show the private sector shrinking in April. “The economy made a strong start to the year, possibly helped by the front-loading of production ahead of a sharp rise in US tariffs. We doubt the pace will last, with growth likely to cool over the coming quarters as uncertainty and trade losses drag on activity. That will clear the way for the Bank of England to keep easing policy gradually,” said Ana Andrade and Dan Hanson. The ONS said business investment jumped 5.9% in the first quarter while consumer spending was up 0.2%. The private sector ended a six month period of stagnation, bouncing back strongly with a 0.8% gain. Government spending on goods and services fell. In March alone, GDP was boosted by a sunshine-induced jump in retail sales, part of across-the-board gains for the services sector. However, economic growth is forecast to slow to just 0.1% in the second quarter “with risks to the downside,” according to the BOE, which believes the underlying picture is stagnant.
> Chancellor of the Exchequer Rachel Reeves said the figures showed the “strength and potential of the UK economy” but added there “is more to do.” Labour has promised to turbocharge Britain’s anemic growth rates in a bid to generate more money to pump into public services. But it has had a rocky start and Reeves may need to raise more money to shore up the public finances in the autumn when she will update her fiscal plans. GDP in March was little more than 1% higher than when the party took power in July last year. Businesses baulked at her first budget, which raised employer payroll taxes by £26 billion ($34.5 billion) and increased the minimum wage by almost 7%. The labor market has weakened in response, with firms shedding jobs for a third month in April.
British consumers have also been hit by rising utility bills and local taxes in April, threatening more pressure on pubs and other parts of the hospitality sector. In new forecasts last week, the BOE said growth will remain around 1% in 2025 before picking up slightly next year. “This robust quarterly reading is probably the pinnacle for economic growth this year, with activity likely to slow sharply going forward as tax and tariff rises and global uncertainty bite,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
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> The UK economy enjoyed its strongest quarterly growth in a year before the double blow of tax hikes and Donald Trump’s trade war. Gross domestic product rose 0.7% in the first quarter, an acceleration from the 0.1% increase at the end of 2024, the Office for National Statistics said Thursday. It was above the 0.6% expected by the Bank of England and private-sector economists. Output in March alone grew by 0.2%, instead of stagnating as economists had forecast. It suggests businesses and consumers were holding up a month before a huge tax hike hit employers and Trump was due to announce sweeping global tariffs. Services and construction both grew strongly, offsetting a sharp fall in manufacturing. The pound gained after the stronger-than-expected data, up 0.2% to $1.3289. Money markets trimmed bets on Bank of England interest-rate cuts slightly, pricing in 40 basis points more easing by the end of the year, which means one quarter-point cut is fully priced with around 60% chance of another.
> The pickup is a boost for Keir Starmer’s Labour government, which has struggled to get the economy motoring since winning power last summer. GDP per head — a key measure of living standards — expanded 0.5% in the first three months of 2025, bouncing back after two consecutive quarterly falls. However, economists are urging caution. The first quarter was aided by strong growth in February as factories ramped up production in an attempt get ahead of Trump’s highly anticipated tariffs by increasing exports to the US. Separate trade figures on Thursday showed exports to the US in the first quarter were the highest since the end of 2022 after a fourth consecutive monthly increase. Car manufacturers ramped up exports to the US in March, driving an increase in shipments of transport and machinery equipment.
> Moreover, the levies subsequently announced on April 2 were far worse than expected, and the blow to confidence is expected to keep weighing on the economy despite Britain and the US agreeing a deal on tariffs and a truce in the trade war between Washington and Beijing. PMI surveys show the private sector shrinking in April. “The economy made a strong start to the year, possibly helped by the front-loading of production ahead of a sharp rise in US tariffs. We doubt the pace will last, with growth likely to cool over the coming quarters as uncertainty and trade losses drag on activity. That will clear the way for the Bank of England to keep easing policy gradually,” said Ana Andrade and Dan Hanson. The ONS said business investment jumped 5.9% in the first quarter while consumer spending was up 0.2%. The private sector ended a six month period of stagnation, bouncing back strongly with a 0.8% gain. Government spending on goods and services fell. In March alone, GDP was boosted by a sunshine-induced jump in retail sales, part of across-the-board gains for the services sector. However, economic growth is forecast to slow to just 0.1% in the second quarter “with risks to the downside,” according to the BOE, which believes the underlying picture is stagnant.
> Chancellor of the Exchequer Rachel Reeves said the figures showed the “strength and potential of the UK economy” but added there “is more to do.” Labour has promised to turbocharge Britain’s anemic growth rates in a bid to generate more money to pump into public services. But it has had a rocky start and Reeves may need to raise more money to shore up the public finances in the autumn when she will update her fiscal plans. GDP in March was little more than 1% higher than when the party took power in July last year. Businesses baulked at her first budget, which raised employer payroll taxes by £26 billion ($34.5 billion) and increased the minimum wage by almost 7%. The labor market has weakened in response, with firms shedding jobs for a third month in April.
British consumers have also been hit by rising utility bills and local taxes in April, threatening more pressure on pubs and other parts of the hospitality sector. In new forecasts last week, the BOE said growth will remain around 1% in 2025 before picking up slightly next year. “This robust quarterly reading is probably the pinnacle for economic growth this year, with activity likely to slow sharply going forward as tax and tariff rises and global uncertainty bite,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.