The UK economy grew 0.7% between January and March, according to the Office for National Statistics. This figure surpassed City expectations of 0.6% and marked the fastest quarterly growth in a year. It followed 0.1% growth in the last quarter of 2024.
Growth led by services and production sectors
The services sector recorded a 0.7% rise, while production output increased 1.1% during the first quarter. The construction sector showed no growth.
Growth in services included strong performances in retail, wholesale and computer programming. Car leasing and advertising also contributed positively. Education, telecoms and legal services experienced declines, slightly offsetting the gains.
Real GDP recorded a 0.7% rise in Q1 2025
Export activity surged ahead of US tariffs
Business investment and export activity rose as firms rushed to act before Donald Trump’s new tariffs took effect.
Sanjay Raja, chief UK economist at Deutsche Bank, stated, “It is clear some frontrunning of trade was in play.”
Export volumes jumped 3.5% after three consecutive quarterly falls. This included a 5.6% rise in goods exports and a 2.0% rise in services exports.
Imports rose by 2.1% overall. Goods imports increased 0.6%, and services imports climbed 5.2%.
Trade deficit narrowed sharply
The total trade deficit narrowed by £3.6 billion to £6.6 billion in the three months to March.
The goods trade deficit narrowed by £4.3 billion to £55.2 billion. The services trade surplus declined by £700 million to £48.6 billion.
Imports from non-EU countries dropped £600 million or 2.5%. EU imports rose by £200 million or 0.9%.
Goods exports to the United States rose for the fourth consecutive month, increasing £2.4 billion. Imports from the US rose £1.3 billion in the same period.
Business investment played a major role
Stronger investment drove growth as companies increased spending on aircraft, IT equipment and machinery.
Paul Dales, chief UK economist at Capital Economics, said, “That rise is completely at odds with the plunge in business confidence triggered by the large rises in national insurance contributions for employers and the minimum wage announced in October’s budget and the US tariff concerns this year.”
Government responds to positive figures
Chancellor Rachel Reeves welcomed the numbers, saying they proved the government’s plan was working.
“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,” she said.
Prime Minister Keir Starmer’s government has signed an agreement with Washington to ease Trump’s tariffs on cars, aluminium and steel. A new trade deal with India was also signed, and Britain will push for closer EU ties at an upcoming summit.
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Analysts warn of slower growth ahead
Despite the strong first quarter, economists remain cautious about the outlook for the rest of the year.
The Bank of England warned of near-stagnant activity amid ongoing global uncertainty.
Mel Stride, the shadow chancellor, warned the economy remained at risk. “While it’s welcome the economy is growing, both the OBR and IMF have downgraded the UK’s growth,” he said.
Quarterly and annual figures at a glance
- UK GDP rose 0.7% from January to March
- Annual GDP grew 1.3% in Q1, slowing from 1.5% in Q4 2024
- Monthly GDP grew 0.2% in March after 0.5% in February
- Real GDP per head rose 0.5% after two quarterly declines
Despite weak confidence surveys, households uk remained steady. Analysts uk expect slower growth in coming months due to Trump’s tariff impact and lower trade confidence.
