UK economy grows by more than expected 0.7% in Q1

The UK economy performed better than expected in the first quarter of the year, with GDP growing by 0.7% between January and March, following a 0.1% rise the prior quarter.

This was ahead of analysts’ expectations, who had forecast a growth of 0.6% for the period.

According to the Office for National Statistics (ONS), this was largely driven by an increase of 0.7% in the services sector, with services output estimated to have increased by 1.5% compared with the same quarter a year ago.

Growth was also boosted by a rise in production, which grew by 1.1% over the period, following falls in the previous three quarters.

Meanwhile, monthly GDP is estimated to have grown by 0.2% in March following growth in both the services and construction sectors.

This growth came ahead of Donald Trump’s “Liberation Day” tariffs announced on 2 April, however, when he unveiled plans for imposing sweeping tariffs on countries around the world, including the UK. 

It also comes ahead of UK employer taxes, which were enacted in April as part of the chancellor’s budget. 

ONS director of Economic Statistics Liz McKeown said: “The economy grew strongly in the first quarter of the year, largely driven by services, though production also grew significantly, after a period of decline.

“Growth in services was broad based, with wholesale, retail and computer programming all having a strong quarter as did car leasing and advertising. These were only slightly offset by falls in education, telecoms and legal services.”

Chancellor Rachel Reeves said: “Today’s growth figures show the strength and potential of the UK economy. Against a backdrop of global uncertainty we are making the right choices in the national interest. But there is more to do, we will go further and faster to make working people better off.”

However, professor Joe Nellis, an economic advisor at accountancy firm MHA, warned that the future medium term economic outlook “remains worrying” in light of US tariffs and higher employment costs.

He said: “Despite the UK outperforming many of its peers in relative terms, the future medium term economic outlook does remain worrying. Despite the modest tariff victories on cars, steel, and aluminium earned by the Prime Minister last week, ongoing trade tensions and US tariffs will hit GDP later this year. 

“The elevated employment costs outlined in the Autumn Budget have begun to kick in from April, cutting businesses’ profits (and ability to reinvest) and slowing recruitment. The Government would be helped by further interest rates cuts by the Bank of England, but the split in the Monetary Policy Committee at its last meeting suggests that this is not as much of a certainty as was once thought.”