The UK economy expanded by 0.7% in the first quarter of the year, the fastest pace in a year, according to official figures that defied earlier warnings of a sharp slowdown. The Office for National Statistics reported that gross domestic product (GDP) rose between January and March, beating City forecasts of 0.6% growth and following a 0.1% expansion in the final quarter of last year.
The growth was driven by Britain’s dominant services sector, with retail, wholesale, computer programming, car leasing, and advertising performing strongly. Production, including manufacturing, mining, and energy, rose by 1.1%, while construction showed no growth. The figures contrast sharply with warnings from business leaders earlier this year that the government’s tax increases, including a £25bn rise in employer national insurance contributions, risked pushing the economy into recession.
Economists cautioned that much of the strength came from businesses rushing to invest and export ahead of US President Donald Trump’s sweeping tariffs. Business investment rose, particularly in aircraft, IT equipment, and machinery, while UK export volumes increased by 3.5% after three consecutive quarterly declines, adding 0.4 percentage points to GDP growth. Paul Dales, chief UK economist at Capital Economics, described the rise as “completely at odds” with the plunge in business confidence caused by tax hikes and tariff concerns.
Chancellor Rachel Reeves welcomed the figures, saying the economy had outpaced all G7 peers in the first quarter. “Up against a backdrop of global uncertainty we are making the right choices now in the national interest,” she said, citing interest rate cuts, trade deals, and support for British Steel. The government has sought to insulate Britain from global trade tensions by striking deals with the US, India, and pursuing closer ties with the EU.
However, economists warned that growth was likely to weaken later in the year amid fallout from Trump’s tariff policies. The Bank of England has forecast near-stagnant activity for the rest of 2025, and surveys show declining consumer and business confidence. Mel Stride, the shadow chancellor, criticised the government’s tax policies, arguing they had damaged business confidence.
