The British economy experienced its fastest growth in a year during the first quarter of 2025, according to official data released on Thursday, providing a boost to the Labour government, which has prioritized economic growth.
The Office for National Statistics reported that the economy, measured by gross domestic product (GDP), grew by 0.7% in the first quarter compared to the last three months of 2024. The services sector, in particular, performed well.
This growth rate made the UK the fastest-growing economy among the G7 nations. The increase was slightly above market expectations, which had predicted a 0.6% growth, and was the largest since the first quarter of 2024, when the economy expanded by 0.9%.
Treasury chief Rachel Reeves welcomed the positive results, highlighting that Labour’s policies since their election in July were starting to bear fruit. She pointed out that the UK’s economy was now the fastest-growing in the G7 for the first three months of 2025, though she acknowledged that more work was needed.
However, economists expect growth to slow down in the second quarter of the year, partly due to the global uncertainty created by U.S. President Donald Trump’s tariff policies. While most tariffs were temporarily suspended for 90 days, including the 10% tariff on UK goods entering the U.S., ongoing trade tensions, particularly between the U.S. and China, continue to weigh on global markets.
Despite this uncertainty, both President Trump and UK Prime Minister Keir Starmer outlined details of a new trade deal between the U.S. and the UK on Thursday. Although Trump maintained the 10% tariff on UK goods, he agreed to reduce tariffs on British autos, steel, and aluminum.
Deutsche Bank’s Chief UK Economist Sanjay Raja warned that the growth spike is likely to be short-lived, especially as trade uncertainty intensifies in the second quarter. He predicted reduced demand for UK exports due to higher U.S. tariffs and weaker global demand.
Economists also expect growth to face challenges in the coming months, particularly with the introduction of new taxes on businesses in April. Additionally, price hikes in key areas, such as domestic energy and water bills, are expected to dampen consumer demand.
