The UK economy grew by 0.7% in the first quarter of the year, the fastest pace in 12 months, defying warnings of a downturn as businesses rushed to invest and export ahead of US President Donald Trump's tariffs. The Office for National Statistics reported gross domestic product (GDP) rose from 0.1% growth in the final quarter of last year, beating City forecasts of 0.6%.
The expansion was driven by the dominant services sector, which grew 0.7%, with strong performances in retail, wholesale, computer programming, car leasing, and advertising. Production, including manufacturing, mining, and energy, rose by 1.1%, while construction showed no growth. The figures provide a boost to Chancellor Rachel Reeves after business leaders earlier warned her tax policies would harm jobs and growth.
However, economists cautioned that later growth would likely weaken due to Trump's tariff plans, announced on 2 April. Paul Dales of Capital Economics noted the rise in business investment—spurred by companies rushing to beat tariffs—was at odds with plunging confidence from higher national insurance contributions and minimum wage increases. UK export volumes rose 3.5% after three quarterly declines, adding 0.4 percentage points to GDP, with Deutsche Bank's Sanjay Raja citing 'frontrunning of trade'.
Reeves said the figures showed the government's plan was working, with the UK outpacing all G7 peers. Prime Minister Sir Keir Starmer's government has sought to insulate Britain by striking trade deals, including an accord with Washington to reduce some tariffs and a deal with India. Analysts had expected strong growth after a 0.5% expansion in February, but March's 0.2% rise surpassed predictions of zero growth.
Despite declining consumer and business confidence, households have remained resilient. But the Bank of England warned last week that prospects had worsened due to global uncertainty from Trump's trade wars, forecasting near-stagnant activity for the rest of the year. Shadow Chancellor Mel Stride criticised the government's tax policies, suggesting they risked undermining future growth.
