UK was fastest-growing G7 member in Q1 2025
Britain has outpaced major international rivals for growth in the first quarter of this year, by accelerating in January-March.
The UK’s 0.7% growth in Q1 2025 shows it was the fastest-growing economy in the G7 during the last quarter – a clear boost for the government this morning.
In contrast, the eurozone only grew by 0.4% in the last quarter, while US GDP contracted slightly due to a surge of imports to beat Donald Trump’s trade war.
Now, we don’t get Japan’s GDP report until tomorrow morning (a small contraction is expected), and Canada’s data is only an early estimate.
But as things stand, here’s the G7 growth league table:
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UK: +0.7% growth
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Canada: estimated to have grown by 0.4%
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Italy: 0.3% growth
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Germany: 0.2% growth
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France: 0.1% growth
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US: -0.075% (or -0.3% on an annualised basis)
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Japan: reporting tomorrow, -0.1% forecast
UK GDP growth of 0.7% QoQ in Q1 2025 (+0.5% on a per capita basis) puts the UK at the top of the G7 league table. Encouraging underlying resilience, although recent surveys (PMIs, labour market surveys) since April tax and trade changes do point to a considerable slowdown in Q2. pic.twitter.com/4mZpkfUWI7
— Simon French (@Frencheconomics) May 15, 2025
Key events
FTSE 100 drops as Iran nuclear deal hopes hit oil price
Britain’s forecast-beating growth hasn’t brought much cheers to the London stock market.
The FTSE 100 index of blue-chip shares has dipped by 0.5% in early trading, down 40 points at 8544 points.
Oil companies are among the fallers, with BP falling by 4.6% and Shell down 3%.
That follows a 3% drop in the oil price this morning, on hopes of a US-Iran nuclear deal, with Brent crude trading around $64 per barrel.
Oil is lower after US president Donald Trump said today that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had “sort of” agreed to the terms.
“We’re in very serious negotiations with Iran for long-term peace,” Trump said on a tour of the Gulf, according to a pool report by AFP.
A deal could lead to sanctions relief for Iran, releasing more oil onto the market.
UK to. invest £630m on clean energy upgrades
Jillian Ambrose
Away from the UK GDP data…Schools, care homes, hospitals and community centres are in line for more than £630m in government funds to fit heat pumps, solar panels, insulation and double glazing to help cut the energy bills of public buildings.
The government revealed the allocations for the Liverpool City Region Combined Authority, the Northumbria NHS Foundation Trust, the Royal Air Force Museum Midlands, Worcester City Council and the University of York, promising an estimated £650m in savings for taxpayers every year for the next 12 years.
Its latest clean energy drive was revealed hours after legislation passed to set up its state-owned energy company Great British Energy late on Wednesday.
GB Energy was a key pillar of the Labour government’s election manifesto and has pledged to back the company with £8.3bn over the course of this parliament to invest alongside the private sector in community energy projects and new technologies like floating offshore wind.
GB Energy’s chair Juergen Maier said the company was created “to ensure British people reap the benefits of clean, secure, homegrown energy”.
Maier added:
“We now have full backing to scale up the company, crowd in investment, and back clean energy projects across the country.”
Energy secretary Ed Miliband will soon outline GB Energy’s strategic priorities – including which technologies it will focus on and how it should consider the public benefits from investment decisions.
UK exports to US jump ahead of trade war
Britain’s exports to the US have hit their highest level in over two years, helping to boost growth and narrow the UK’s trade deficit.
Exports of goods to the United States increased by £2.4bn in January to March, to £17.5bn, the highest level since the fourth quarter of 2022.
This could suggest a rush of demand to import goods into the US before Donald Trump announced his new tariffs on early April.
The ONS explains:
As this release covers trade up to March 2025, there will be no direct impact of tariffs on this data. However, this pattern of increasing exports could be a sign of changing trader behaviour ahead of tariff introduction.
UK imports from the US rose by less, increasing by £1.3bn, helping to boost the UK’s trade balance.
Paul Dales, chief UK economist at Capital Economics, says this will have added to GDP:
Moreover, net trade added a further 0.4ppts to GDP growth as a 3.5% q/q rise in exports more than offset a 2.1% q/q gain in imports. Again, some of that was probably a result of activity being brought forward from Q2 ahead of US tariffs.
Dales adds:
Overall, the main reason why GDP was stronger than everyone expected appears to be because US and UK tax changes meant that more activity was pulled forward into Q1 from Q2 than everyone expected, rather than because the UK economy is fundamentally stronger.
This means Q2 may well be weaker than widely expected (before today our forecast was 0.0% q/q) and the best part of the year may already be behind us.
Raj Badiani, economics director, Europe at S&P Global Market Intelligence, says:
The UK economy enjoyed a large boost from rising exports in the first quarter, suggesting some stockpiling of exports from the UK ahead of the imposition of a higher US tariff in early April.
Economists fear growth rebound is unlikely to last
Disappointingly, economists are predicting that the UK won’t sustain its strong growth.
The Resolution Foundation thinktank fears UK growth stumbled in April – the month when Donald Trump’s trade wars rattled the world economy.
Simon Pittaway, senior economist at the Resolution Foundation, says:
“The UK economy has made a stronger than expected start to 2025, growing at a healthy 0.7 per cent.
“But this growth rebound is unlikely to last, with data for April looking far weaker, and huge tariff-shaped clouds hanging over the global economy.
“These growth headwinds are all the more alarming given Britain’s recent economic record – with GDP per person still lower today than it was before the pandemic.”
Matt Swannell, chief economic advisor to the EY ITEM Club, predicts that quarterly GDP growth across the rest of this year is likely to be slower than in Q1, explaining:
In part, this is because the activity data in Q1 was probably boosted by some residual seasonality. However, tighter fiscal policy, the lagged effect of past interest rate rises, and the imposition of higher US tariffs on goods exports from the UK and the rest of the world mean we also expect the underlying pace of output growth to remain modest throughout this year.”
One wrinkle in today’s generally decent UK GDP report is that the construction sector stagnated in the last quarter.
Construction output was unchanged January-March, compared with October-December, the ONS reports.
This was due to a 1.2% drop in repair and maintenance work, which wiped out a 0.9% rise in new work.
In March alone, though, construction output grew by 0.5%, following growth of 0.2% in February.
No change for construction as output flatlined in Q1 2025 when compared to the same period in 2024.
That said, March had a sunnier outlook with 0.5% growth reported. This was driven predominantly by both new work, and repair and maintenance, which grew by 0.6% and 0.4%,… pic.twitter.com/0fh87fYoys
— Emma Fildes (@emmafildes) May 15, 2025
Scott Gallacher, director at financial planners Rowley Turton, says:
“Today’s figures will be a welcome boost for Rachel Reeves, finally putting some decent growth on the table. Perhaps there’s hope that the Chancellor’s much-talked-about Growth Agenda may yet deliver.
But we’re far from out of the woods. Construction has flatlined, hardly encouraging when the government is banking on 1.5 million new homes to fuel growth and tackle the housing crisis.
This morning’s strong growth figures will ‘blow away’ talk of a UK recession, points out the BBC’s economics editor Faisal Islam.
Blimey:@ONS reports that the UK economy grew by 0.7% in Q1 of 2025, blowing away the recession talk, and almost certainly the fastest growing economy in the G7 in that period….
— Faisal Islam (@faisalislam) May 15, 2025
Today’s GDP reading is “very good news for the economy”, reports Professor Costas Milas, of the University of Liverpool’s Management School.
He tells us:
GDP grew (quarter-on the same quarter of the previous year) by 1.3% which is higher than the BoE’s estimate of 1.2% based on their latest Monetary Policy Report. This creates a momentum which should revise growth forecasts for 2025Q2 upwards.
Based on my own estimates, GDP in 2025Q1 is around 0.8% below capacity (or equilibrium output). Consequently, the risk for inflationary pressures is quite low and therefore, the MPC can proceed with further interest rate cuts as soon as next month if they decide to do so. The only downside? Today’s GDP reading covers the period before Trump’s Liberation Day (which initiated trade wars).
Reeves: We’ve grown faster than the US, Canada, France, Italy and Germany
Chancellor Rachel Reeves has hailed today’s growth figures, pointing out that the UK expanded faster than other major economies in January-March.
But … Reeves is also cautioning that there is ‘more to do’:
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.
“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.
“Our plan for change is working. But I know there is more to do and that is why I’m determined we go further and faster to make working people better off.”
UK was fastest-growing G7 member in Q1 2025
Britain has outpaced major international rivals for growth in the first quarter of this year, by accelerating in January-March.
The UK’s 0.7% growth in Q1 2025 shows it was the fastest-growing economy in the G7 during the last quarter – a clear boost for the government this morning.
In contrast, the eurozone only grew by 0.4% in the last quarter, while US GDP contracted slightly due to a surge of imports to beat Donald Trump’s trade war.
Now, we don’t get Japan’s GDP report until tomorrow morning (a small contraction is expected), and Canada’s data is only an early estimate.
But as things stand, here’s the G7 growth league table:
-
UK: +0.7% growth
-
Canada: estimated to have grown by 0.4%
-
Italy: 0.3% growth
-
Germany: 0.2% growth
-
France: 0.1% growth
-
US: -0.075% (or -0.3% on an annualised basis)
-
Japan: reporting tomorrow, -0.1% forecast
UK GDP growth of 0.7% QoQ in Q1 2025 (+0.5% on a per capita basis) puts the UK at the top of the G7 league table. Encouraging underlying resilience, although recent surveys (PMIs, labour market surveys) since April tax and trade changes do point to a considerable slowdown in Q2. pic.twitter.com/4mZpkfUWI7
— Simon French (@Frencheconomics) May 15, 2025
Chart: fastest UK growth in a year
At 0.7%, the UK’s quarterly growth rate has hit its highest level in a year – since the end of the 2023 recession.
On an annual basis, real UK GDP is estimated to have increased by 1.3%, compared with the same quarter a year ago.
Real GDP per head rose in Q1
The UK economy also grew if you adjust for population changes.
The ONS reports that real GDP per head is estimated to have grown by 0.5% in Quarter 1 2025, following two consecutive quarterly falls.
ONS: economy grew strongly in Q1 2025
Here’s ONS director of economic statistics Liz McKeown explaining why the UK economy grew by 0.7% in the first quarter of the year:
“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.”
Economy grew 0.2% in March alone
More good news: the UK economy kept growing in March.
Defying forecasts of stagnation, monthly GDP is estimated to have grown by 0.2% in March 2025 because of growth in the services and construction sectors.
This follows an unrevised increase of 0.5% in February 2025 and an unrevised no growth in January 2025.
UK econonomy grew 0.7% in Q1 2025
Newsflash: The UK economy expanded by 0.7% in the first three months of this year, new data shows.
The Office for National Statistics reports that growth accelerated in the January-March quarter, up from 0.1% in October-December.
Services (+0.7%) and production (+1.1%) both grew, while construction (0.0%) was flat, the ONS says.
That’s good news for the Labour government in its push for growth, following criticism that last autumn’s tax-raising budget would hurt the economy.
It’s also slightly stronger than City economists had expected.
Today’s GDP report could spur economists to revise higher their forecasts for growth this year higher.
Economist Julian Jessop explains:
FYI, the first estimate of UK GDP in Q1 coming out on Thursday should prompt a raft of upward revisions to growth forecasts for 2025 🤓
The downside risks from a global trade war are also fading fast, though there’s still plenty of room for more policy mistakes at home… 🧵
— Julian Jessop (@julianHjessop) May 12, 2025
Dealing with Thursday’s numbers first, the strength of the recent monthly GDP data means that – barring any big revisions – quarterly growth is likely to be around 0.6%, even with a small fall in March 👇
0.7% is also more likely than 0.5%… pic.twitter.com/dVvlE2ZseM
— Julian Jessop (@julianHjessop) May 12, 2025
This would be stronger than the 0.4% or so that most forecasters were expecting when the Treasury’s last monthly poll was published 👇
The average of new forecasts for 2025 as a whole was then just 0.8%…https://t.co/HAzI2flz7F
— Julian Jessop (@julianHjessop) May 12, 2025
The additional headwinds from higher payroll costs and trade fears will drag growth down again in Q2. But it would now have to weaken a long way to keep full-year growth below 1%.
FWIW, I’m expecting to revise my own central forecast for 2025 up to about 1¼% from 1%…
— Julian Jessop (@julianHjessop) May 12, 2025
Of course, a few tenths of a percent either way is not a big deal in itself.
Nonetheless, even just 1¼% would be better than the 1% expected by the BoE and OBR (so good for fiscal headroom), and the positive headlines should boost confidence…
— Julian Jessop (@julianHjessop) May 12, 2025
Crucially, many surveys of household and businesses show that people are much less pessimistic about their own prospects than they are for the economy as a whole.
Here, for example, is the GfK poll of consumer confidence…https://t.co/ESyF40oFwU pic.twitter.com/JBlOnJAjeZ
— Julian Jessop (@julianHjessop) May 12, 2025
Even UK manufacturers are still relatively optimistic about their own output over the next 12 months, esp. compared to peers in the euro area 👇
This makes sense as the UK should be hit less hard by a global trade war (partly a Brexit benefit)…https://t.co/B960TclipY pic.twitter.com/7ZKTkAb4kp
— Julian Jessop (@julianHjessop) May 12, 2025
Introduction: It’s UK GDP Day
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s economy is under the microscope today, as we eagerly await the first estimate for UK GDP for the first quarter of the year.
Economists are expecting to learn that growth picked up in the January-March quarter, after a weak end to 2024.
GDP is forecast to have risen by a relatively pacy – by recent standards – 0.6% in Q1 2025. That would be rather quicker than the sluggish 0.1% recorded in October-December 2024.
A pick-up in growth would be warmly welcomed by chancellor Rachel Reeves, as it might indicate that the government’s push for higher growth was finally getting moving.
However, last week the Bank of England cautioned that “erratic factors”, such as disruptions to manufacturing output at the end of last year, would inflate headline GDP growth in this quarter.
Growth data for March alone will also be released at 7am – it’s expected to show that GDP stagnated in the month, after a strong February (data last month showed 0.5% growth).
GDP data always gives a ‘rear view mirror’ of the economy, but today’s data feels particularly historic – as it covers the period just before “Liberation Day”, when Donald Trump launched his trade war at the start of April (before a flurry of backtracking on tariffs).
Michael Field, chief equity strategist at Morningstar, sets the scene:
“UK GDP is expected to be flat in March, meaning a year over year rise of 1%, not blow-out, but growth nonetheless.
Investors will be able to place a little more faith in the trajectory of growth in the UK now that a trade deal has been agreed with the US and the risk of exorbitant tariffs has been removed. But inflation, at 2.6%, is still outpacing growth by some measure, and some areas of the economy like manufacturing and industrial production are expected to have gone backwards over the last 12 months.
The agenda
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7am BST: UK GDP report for Q1 2025
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7am BST: UK trade balance report for March
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9.30am BST: UK labour productivity report for Q4 2024
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10am BST: Eurozone employment and GDP reports for Q1 2025
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1.30pm BST: US weekly jobless claims report
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1.30pm BST: US retail sales report for April
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1.30pm BST: US producer prices index (PPI) for April
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1.40pm Jerome Powell speech (Framework Review at the Thomas Laubach Research Conference, Washington DC)
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3pm BST: Swati Dhingra: Speech at the New Economics Foundation conference ‘EU macroeconomic policy in an age of shocks’, Brussels
