UK economy has grown more than expected

The UK’s economy grew by more than expected in the first three months of 2025, according to the latest official figures.

The economy expanded by 0.7% in the January-to-March period, which was stronger than the 0.6% that analysts had forecast.

The Office for National Statistics (ONS) said growth was largely driven by the UK services sector, although production also “grew significantly”.

The figures mark the period just before the US imposed import tariffs and UK employer taxes increased in April, and analysts warned the strong rate of growth was unlikely to continue.

Chancellor Rachel Reeves said the latest figures showed “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 added.

But shadow chancellor Mel Stride pointed out that both the Office for Budget Responsibility and the International Monetary Fund had downgraded the UK’s growth forecast for this year.

He also criticised the rise in employers’ National Insurance payments, which came into effect in April, calling it a “jobs tax”.

“Labour inherited the fastest-growing economy in the G7, but their decisions have put that progress at risk,” he said.

Liberal Democrat Treasury spokesperson Daisy Cooper said the data was “positive news”, but there was “no time for complacency”.

Steve Bulley President of Dorchester Chamber for business added: “The latest UK economic growth figures indicate a stronger-than-expected start to 2025, with GDP rising by 0.7% in the first quarter. While this provides short-term optimism, smaller businesses and sole traders,  must remain cautious.

“The recent increase in national insurance contributions and global trade tariffs could create financial pressures, particularly for businesses reliant on imports and exportsin the next quarter.

“Smaller Chamber members will need to focus on financial resilience, strategic planning, and leveraging local business networks for support. Change is a constant and a proactive approach will be key to maintaining stability in a shifting economic landscape.”

The economy grew by 0.2% in March, the ONS said, which was also better than the zero growth that had been forecast.

Liz Martins, senior UK economist at HSBC, told the BBC’s Today programme she was feeling “quite cheered” by the figures.

The economy had grown strongly in February, which had been put down partly to companies ramping up output and exports ahead of US tariffs.

But Ms Martins said the latest figures indicated growth had been “driven by the good stuff”.

“Business investment is up nearly 6% on the quarter and the service sector is doing well as well.

“So it’s not just manufacturers selling to the US to get ahead of the tariffs.”

However, Paul Dales at Capital Economics was more sceptical, saying the latest growth “might be as good as it gets for the year”.

He said the strong rise in GDP was “unlikely to be repeated as a lot of it was due to activity being brought forward ahead of US tariffs and the rise in domestic businesses taxes”.

Simon Pittaway, senior economist at the Resolution Foundation, also said the growth rebound was “unlikely to last, with data for April looking far weaker, and huge tariff-shaped clouds hanging over the global economy”.