Surprise uplift in GDP may be calm before storm
Growth in the services and manufacturing sectors helped the UK economy to expand by 0.5% in February, more than expected, according to the Office for National Statistics.
Economists had predicted growth of just 0.1%, and the higher figure comes as the UK economy braces itself for the impact of tariffs imposed on exports to the US
The latest data reverses a slight fall in January, but the increase in gross domestic product in February could be a high water mark if Donald Trump’s tariffs spark a global trade war.
It also came ahead of this month’s rises in utility bills and council tax increases while employers have been hit with £25 billion of tax rises.
Chancellor Rachel Reeves described the figures as “an encouraging sign”, adding “we are not complacent. We must keep going further and faster on our Plan for Change.
“The world has changed, and we have witnessed that change in recent weeks. I know this is an anxious time for families who are worried about the cost of living and British businesses who are worried about what this change means for them.
“This government will remain pragmatic and cool-headed as we seek to secure the best deal with the United States that is in our national interest.”
Martin Sartorius, principal economist, CBI, said: “UK GDP growing above expectations in February provides some hope that the economy may have seen a solid expansion over the first quarter, following a soft patch in the second half of last year.
“However, underlying momentum in the private sector remains feeble. Many firms are grappling with higher labour costs following the Autumn Budget, and the recently announced US tariffs are expected to weigh on the UK and global economies.
“Businesses are clear that the government should try to avoid further escalation in trade tensions, and instead double down on its commitment to free, fair, and open trade. However, firms also need further measures to bolster confidence amid a tough and uncertain operating environment.
“By adopting a whole-economy perspective and using this opportunity to explore ways to ease existing pressures on businesses – such as implementing smarter regulation or revisiting the Employment Rights Bill – the government can help kickstart growth, foster innovation, and boost productivity.”
Kevin Brown, savings specialist at Scottish Friendly, said: “The latest GDP data points to a tentative improvement in the UK economy. However, a lot has changed in the month since the data was gathered.
“The US tariff uncertainty continues to destabilise economies around the world, and the UK is no exception, albeit much less than some. The ultimate impact for the UK is still unclear, however achieving sustained growth against this backdrop will be tough.
“Major economists continue to revise growth lower, with KPMG the latest group to cut its estimates. The uncertain trading environment is undoubtedly part of the problem, but the UK has some home-grown issues as well, including high energy costs which will continue to hurt UK households.”
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