The UK economy grew by an unexpectedly fast 0.7% in the first three months of the year.
Latest figures from the Office for National Statistics (ONS) show that GDP was expanding at its fastest rate for year over the the first quarter.
It means that the UK was almost certainly the fastest growing economy in the G7 at the start of 2025.
The growth was more rapid than expected by most City forecasters who said a rush by exporters to get ahead of new US tariffs, higher Government spending, and sunny weather boosting the high street all contributed to the spurt.
Separate ONS trade figures showed exports to the US surged by £2.4 billion in the first quarter suggesting British companies were bringing forward sales ahead of expected tariffs,
Liz McKeown, ONS director of statistics, 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.”
Monthly growth slowed to 0.2% in March, down from from 0.5% in February, while January was flat.
The relatively robust growth at the start of the year will please Rachel Reeves and Keir Starmer. Crucially, real GDP per head was up by 0.5%, following two consecutive quarterly falls.
The Chancellor said: “Today's growth figures show the strength and potential of the UK economy.
“In the first three months of the year, the UK economy has grown faster than the US, Canada, France, Italy and Germany. “
Although it is likely to prove a short-lived boost, the economy entered what is likely to prove a far tougher second quarter is good shape and with forward momentum.
A raft of tax and bill increases kicked in during April, which was also the month when President Trump unleashed his “Liberation Day” tariff reforms brought turmoil to financial markets for much of the month.
Economists are particularly concerned about the impact of sharply higher National Insurance contributions that employers from April. Many businesses have warned that the tax raising measure, announced in last October’s Budget, will lead to job losses and higher prices.
The tariffs and tax rises are expected to pull down the economy in the second quarter of 2025.
Economists at Deutsche Bank wrote: “We expect GDP growth to reverse in the second quarter, before slowly edging higher through the course of the year – and eventually returning to its trend growth rate in early 2026.”
The Bank of England last week upgraded its prediction for the year ahead, forecasting that the economy will grow by 1% in 2025, ahead of its previous 0.75% forecast on the back of a strong start.
The Bank’s policymakers cut UK interest rates to 4.25% this month after a slowdown in inflation.
The GDP announcement comes after recent data which the ONS said pointed to a “cooling” jobs market in the first quarter of the year.
Earlier this week, figures showed that wage growth eased back in the three months to March while Britain’s unemployment rate hit a near four-year high of 4.5%.
George Brown, senior economist at Schroders said:"It is encouraging to see the UK economy begin 2025 on a firm growth footing. But growth in the years since the pandemic has followed a common pattern of strong starts that later fizzle out, pointing to seasonal adjustment issues.
"In any case, UK growth looks set to moderate later this year. While a UK-US trade deal will see the US lower tariffs on some goods, the UK, as a highly open economy, will still suffer from any global slowdown.
“This will put further pressure on the public finances, potentially requiring the Chancellor to opt for spending cuts or tax hikes, or some combination of the two."
Joe Nellis, economic adviser at accountancy firm MHA, said: “GDP growth of 0.7% for Q1 2025 is welcome news for the Government. To maintain the Chancellor’s slim fiscal headroom, economic growth is imperative — without the subsequent increase in tax revenues the government cannot stick to its fiscal plans.
A key factor in this growth has been the resilience of consumer activity — the rise in retail sales each month in Q1, driven by net positive real earnings growth and sunny weather, is reflective of this and will have contributed to the uptick in GDP in Q1.
“This is alongside the one-off stimulus of government spending from the Autumn Budget and a front-loading of export purchasing ahead of tariff imposition.
“However, this uplift is likely to be only temporary. Increased government spending and the rush for exports were by their nature one-time boosts that are not repeatable catalysts for sustainable growth.”
