LONDON (AP) — The British economy experienced its most significant growth in a year during the first quarter of 2025, as reported by official statistics released on Thursday. This growth is a crucial development for the Labour government, which has prioritized boosting the national economy since its election in July 2024.
The Office for National Statistics revealed that the gross domestic product (GDP) of the UK increased by 0.7% during the first quarter of 2025 compared to the last quarter of 2024. This expansion was largely driven by robust performance in the services sector, which is the dominant sector of the British economy. This quarterly increase places the UK as the fastest-growing economy among the G7 leading industrial nations.
The growth figure exceeded market expectations, which had anticipated a 0.6% rise. Furthermore, this marks the most substantial growth since the first quarter of 2024, where the economy expanded by 0.9%. Treasury chief Rachel Reeves expressed her enthusiasm regarding the growth figures, emphasizing that the Labour government’s strategic decisions were beginning to yield positive results. “We’re set to be the fastest growing economy in the G-7 in the first three months of this year and that’s incredibly welcome, but I know that there is more to do,” Reeves stated during her visit to a Rolls-Royce factory located in Derby, northern England.
Despite this encouraging growth, many economists predict a slowdown in the second quarter of 2025. A portion of this anticipated decline can be attributed to the uncertainties in the global market, particularly due to tariff policies implemented by U.S. President Donald Trump. Although most tariffs were temporarily paused for 90 days in response to market turmoil, including a 10% tariff on UK goods entering the U.S., the overall global economic landscape remains precarious. This uncertainty is largely influenced by the ongoing U.S.-China trade war.
Some optimism did emerge when both President Trump and British Prime Minister Keir Starmer outlined a trade deal between the U.S. and the U.K. Although Trump maintained the 10% baseline tariff on UK goods, he agreed to reduce tariffs on British automobiles, steel, and aluminum. Sanjay Raja, chief U.K. economist at Deutsche Bank, noted that while the recent growth figures are promising, they are likely to be unsustainable. He expressed concerns that exporters could face diminished demand due to increased U.S. tariffs and a decline in overall global demand.
Economists are also forecasting challenges for the British economy in the upcoming months, particularly as new business taxes were imposed in April 2025. In addition, a range of price increases, including surges in domestic energy and water bills, are expected to suppress consumer demand. This combination of factors suggests that the momentum gained in the first quarter may not hold in the following months.
While the initial growth figures are a positive signal for the U.K. economy and the Labour government, looming trade uncertainties and fiscal changes present significant challenges ahead. The situation warrants close monitoring as both domestic conditions and the international landscape continue to evolve.
