The UK economy grew faster than expected in the first quarter of 2025, according to official figures.
Gross domestic product (GDP) — the standard measure of an economy's value — grew 0.7% in the first quarter of 2025, the Office for National Statistics (ONS) said.
This ahead of market estimates of 0.6% and a marked improvement of the 0.1% growth recorded over Christmas.
Services (+0.7%) and production (+1.1%) both grew, while construction (0.0%) was flat.
Liz McKeown, director of economic statistics at the ONS, explained that growth in services, retail and computer programming all had a “strong quarter” along with car leasing and advertising.
“The economy grew strongly in the first quarter of the year, largely driven by services through production also grew significantly, after a period of decline,” McKeown said.
On an annual basis, real UK GDP is estimated to have increased by 1.3%, compared with the same quarter a year ago.
GDP expanded 0.2% in the month of March, which similarly beat expectations. No growth at all had been forecast for the month.
Chancellor Rachel Reeves said: “Today's growth figures show the strength and potential of the UK economy.
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“In the first three months of the year, the UK economy has grown faster than the US, Canada, France, Italy and Germany.
“Up against a backdrop of global uncertainty we are making the right choices now in the national interest. Since the election we have already had four interest rate cuts, signed two trade deals, saved British Steel and given a pay rise to millions by increasing the minimum wage.
“Our Plan for Change is working. But I know there is more to do and that is why I’m determined we go further and faster to make working people better off.”
The UK’s 0.7% growth in Q1 2025 shows it was the fastest-growing economy in the G7 during the last quarter.
The eurozone grew by 0.3% in the first quarter of this year, while US GDP contracted slightly due to a surge of imports due to president Donald Trump’s trade war. Germany grew by 0.2%, France 0.1% and Italy 0.3%.
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Sanjay Raja of Deutsche Bank said Reeves’ hopes of sustained growth could be dashed on the rocks of Donald Trump’s tariffs.
He said: “What drove output higher? In short, a little bit of household consumption, but a whole lot of business investment and exports.
“The jump in GDP will likely be short-lived, however. Trade uncertainty will likely hit its peak in Q2-25.
“Exporters will likely see reduced demand as well from higher US tariffs and weaker global demand.”
Boss of investment bank JP Morgan told Bloomberg TV today that recession remains a possibility as tariff fallout continues to buffet global economies.
Jamie Dimon said: "If there’s a recession, I don’t know how big it’ll be or how long it will last.
“Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point.”
Reeves has insisted that growth figures show the British economy can navigate global headwinds.
Speaking during a visit to the Rolls-Royce (RR.L)factory in Derby, she said: “We’re set to be the fastest growing economy in the G7 in the first three months of this year and that’s incredibly welcome, but I know that there is more to do.
“The cost of living crisis continues to affect families right across our country. I understand that and I hear that.
“But despite the challenges that we face, our economy is strong.
“Despite the global headwinds that we face, I can see the potential and I know that we can seize those opportunities.”
Lindsay James, investment strategist at Quilter, said: "This robust performance will offer reassurance to policymakers, especially coming so soon after the Bank of England’s first rate cut of the cycle to 4.25%. While today’s data doesn’t radically shift the economic picture, it does suggest that the UK is on slightly firmer footing than previously feared.
"However, challenges remain. Clearly some sources of strength could be put down to factors such as the change of the stamp duty land tax threshold, which brought forward purchases.
"Furthermore, the UK-US trade agreement signed earlier this month, though politically symbolic, is unlikely to deliver immediate economic dividends. While tariffs on select goods such as steel and automotive parts have been eased, a 10% duty remains on many other exports, and concerns are already emerging that the deal could strain UK-China relations, particularly around sensitive technologies."
At 0.7%, the UK’s quarterly growth rate has hit its highest level in a year — since the end of the recession at the start of 2024.
Scott Gardner, investment strategist at digital wealth manager, Nutmeg, said: “Looking forward, while the first quarter saw decent growth, there is some uncertainty ahead. The rise in national insurance contributions for business has not shown up so far in labour market data.
"Elsewhere, Manufacturing and Service PMIs have slowed consistently through the quarter. Alongside the fallout from recent tariff announcements, this slowdown could provide a headwind in the second quarter, potentially stalling UK economic growth.”
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The latest data was collected before the 2 April announcement by US president Donald Trump of sweeping new tariffs, including 10% duties on imports from the UK. Although some of the measures have since been scaled back, economists warn the trade actions could weigh on global growth in the coming quarters.
Alfie Stirling, director of insight and policy at JRF, said: "As the chancellor has pointed out herself, families experience the economy not in terms of percentage points of GDP but by the pounds in their pockets. A parliamentary term that ends with families worse off than when it started will prove a difficult record to defend at the ballot box, with this month’s local elections offering an early indication."
Real GDP per head is estimated to have grown by 0.5% in in the first three months of 2025, following two consecutive quarterly falls.
Isaac Stell, investment manager at Wealth Club said: "With the winds of tariff turmoil whipping up economic seas, today's better than expected GDP figures for the UK show an economy that has so far been able to navigate itself to calmer waters."
Prime minister Keir Starmer said: “The UK now has the fastest growth in the G7 – our plan for change in action.“We’ve had four interest rate cuts since July and wages are rising faster than prices.“But I know the Tory cost of living crisis isn’t over – we will go further and faster to deliver for working people.”
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