UK GDP shows stronger growth than expected – Daily Business

The UK economy grew by a stronger-than-expected 0.7% in the first three months of this year, according to new data.

GDP growth accelerated in the January-March quarter, up from 0.1% in October-December.

Growth came from services (+0.7%) and production (+1.1%), while construction (0.0%) was flat, the ONS says.

ONS director of economic statistics Liz McKeown 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.

“Growth in services was broad-based, with wholesale, retail and computer programming all having a strong quarter as did car leasing and advertising. These were only slightly offset by falls in education, telecoms and legal services.”

The figures will be a relief to the Labour government, though the current quarter will reveal the initial impact of Chancellor Rachel Reeves’ tax hikes.

Commenting on the GDP figures, she 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,” she said.

“Up against a backdrop of global uncertainty we are making the right choices now in the national interest. Since the election we have already had four interest rate cuts, signed two trade deals, saved British Steel and given a pay rise to millions by increasing the minimum wage.”

Ben Jones, Lead Economist, CBI, said:    “The rise in activity in March was a pleasant surprise, coming on the back of the strong bounce in February.

“While the latest data adds to signs that a gradual recovery in household spending may be underway, the strength of GDP over Q1 is likely to prove a one-off.

“An up-tick in inflation and a cooling labour market will see real household income growth slow this year, though lower interest rates should encourage consumers to save less and spend more.

“Businesses remain cautious over hiring and investment plans given the steep rise in employment costs following the Autumn Budget. And the uncertain global economic backdrop is hardly conducive for long-term planning.

“Now is a critical time for government to hardwire growth into the economy through the upcoming Spending Review. Measures to accelerate tech adoption alongside a modern Industrial Strategy can support the UK’s investment and growth potential and bolster the UK’s competitive position”.

Kevin Brown, savings specialist at Scottish Friendly, said: “This round of GDP data is undoubtedly encouraging, building on the UK economy’s strong showing in February. It suggests that in spite of the tax rises announced in the budget and multiple sources of global economic uncertainty, the UK economy has some resilience. It could yet prove the naysayers wrong.

“The problem is that with this US administration’s tariffs, data can be out of date very quickly. In the intervening month or so, we’ve had a US/UK trade deal, a US/China trade deal, tariffs imposed and tariffs rescinded. While the UK has greater clarity on its trading outlook, it is still vulnerable to problems in the broader economy.

“Nevertheless, there are reasons to be optimistic. The trade deal with the US at least protected key industries and a deal with the EU is imminent. Interest rates are falling, which should reduce mortgage and other borrowing costs for households. The ‘Armageddon’ scenario on the global economy appears to have passed.”