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The British economy expanded at its fastest rate in a year during the first quarter of 2025, providing a boost to the Labour government, which has prioritized economic growth.
According to the Office for National Statistics, the UK’s GDP increased by 0.7% from the final quarter of 2024, mainly driven by the services sector. This growth slightly exceeded market expectations of 0.6% and positioned the UK as the fastest-growing economy among G7 nations.
Treasury chief Rachel Reeves welcomed the data, asserting that it indicates Labour’s economic policies are starting to take effect. Speaking at a Rolls-Royce 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 there is more to do.”
However, economists predict a potential slowdown in the second quarter, citing uncertainties arising from U.S. President Donald Trump’s trade policies. Although some tariffs were temporarily suspended for 90 days, including a 10% baseline tariff on UK goods entering the U.S., ongoing U.S.–China trade tensions are causing concern.
On Thursday, Trump and UK Prime Minister Keir Starmer announced a new U.S.–UK trade agreement, which maintains the 10% baseline tariff but reduces duties on British automobiles, steel, and aluminum.
Despite the positive Q1 figures, Sanjay Raja, chief UK economist at Deutsche Bank, warned that the growth may not be sustained due to escalating trade disruptions and potential drops in export demand.
Economists further cautioned that growth could slow in the second quarter due to new business taxes introduced in April and rising domestic costs, including higher energy and water bills, which could impact consumer spending.
