The UK economy grew in the opening months of the year, before April’s tax rises and the announcement of US trade tariffs.
The Office for National Statistics on Thursday confirmed that gross domestic product (GDP) expanded by 0.7% in the first quarter of 2025, exceeding expectations after a stronger winter than initially forecast. However, the data showed the economy flatlined in March, following a 0.5% rise in February.
The figures cover the period immediately before former US president Donald Trump unveiled sweeping global tariffs as part of his April “Liberation Day” address, and before the increase in company national insurance contributions took effect. Both measures are expected to drag on growth in the second quarter.
The 0.6% expansion offers a political lift to Chancellor Rachel Reeves and the Labour Government, who have made economic growth their central priority. Analysts at Deutsche Bank said the first-quarter performance “will likely have jumped significantly – outpacing almost all forecasters’ expectations coming into the year”.
They added: “By all accounts, a surprisingly stronger end to 2024 combined with some strength in domestic spending and frontrunning of trade ahead of Liberation Day will have led to a bigger jump to start the year.
“The bump higher in activity will likely be short lived, however. We expect GDP growth to reverse in the second quarter, before slowly edging higher through the course of the year – and eventually returning to its trend growth rate in early 2026.”
The Bank of England last week upgraded its growth forecast for 2025 from 0.75% to 1%, citing the strong start to the year. It also cut interest rates to 4.25% following a slowdown in inflation.
The GDP figures followed a string of other official data suggesting a cooling labour market. Earlier this week, the ONS reported that wage growth eased in the three months to March, while unemployment rose to its highest level in nearly four years.
