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The UK economy grew by 0.7% in the first three months of the year, according to official figures, defying business warnings of a collapse in confidence ahead of Labour’s tax increases and Donald Trump’s sweeping tariffs.
The Office for National Statistics said gross domestic product (GDP) rose at the strongest pace in a year over the first quarter, continuing an expansion after growth of 0.1% in the final three months of 2024. City economists had forecast a rise of 0.6%.
Driven by a Britain’s dominant services sector, the latest snapshot will bolster the chancellor, Rachel Reeves, after business leaders had warned earlier this year that her tax policies would hit jobs and growth.
However, economists have cautioned that growth later in the year is likely to be much weaker than in the first quarter, amid concerns over the fallout from Trump’s erratic tariff plans after his “liberation day” announcement on 2 April.
The Bank of England last week said Britain’s prospects for growth had worsened amid the heightened global uncertainty over the US president’s trade wars, as it forecast near stagnant activity for the rest of the year.
Keir Starmer’s government has sought to insulate Britain from the international fallout by striking trade deals and focusing attention on the government’s industrial strategy, including agreeing an accord with Washington to reduce some of Trump’s tariffs on cars, aluminium and steel.
The UK prime minister also agreed a long-desired trade deal with India, and will next week push for closer trade ties with the EU at a summit designed to “reset” relations with Brussels after Brexit.
While analysts had predicted bumper growth in the first quarter, after an unexpectedly strong 0.5% expansion in February, the latest monthly figures showed that GDP in March rose by 0.2%. City economists had forecast zero growth on the month.
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