The UK economy grew at the fastest pace in a year between January and March, defying warnings of a collapse in activity, as businesses scrambled to invest and export before Donald Trump’s sweeping tariffs.
The Office for National Statistics said gross domestic product (GDP) rose by 0.7% in the quarter, beating City predictions of a 0.6% rise and continuing an expansion after growth of 0.1% in the final three months of last year.
Driven by Britain’s dominant services sector, the latest snapshot will bolster the chancellor, Rachel Reeves, after business leaders had warned earlier this year that her tax policies would hit jobs and growth.
However, economists cautioned that growth later in the year was likely to be much weaker, amid concerns over the fallout from Trump’s erratic tariff plans after his “liberation day” announcement on 2 April.
The ONS said growth in the service sector economy was broad-based over the first quarter, with retail, wholesale and computer programming having a strong start to the year, as did car leasing and advertising. This was slightly offset by falls in education, telecoms and legal services.
Alongside growth of 0.7% in the service sector, production – which includes manufacturing, mining and energy – rose by 1.1%, while activity in the construction sector showed no growth.
The latest snapshot is in sharp contrast to the alarm being sounded by business leaders earlier this year, who warned that Reeves’s autumn budget – including a £25bn rise in employer national insurance contributions from April – risked crashing the economy into recession.
However, economists said much of the strength in the first quarter was the result of stronger levels of business investment as companies rushed to beat the US president’s tariffs, with higher spending on aircraft, IT equipment and machinery.
“That rise is completely at odds with the plunge in business confidence triggered by the large rises in national insurance contributions for employers and the minimum wage announced in October’s budget and the US tariff concerns this year,” said Paul Dales, the chief UK economist at the consultancy Capital Economics.
Highlighting the scramble to beat Washington’s swingeing border taxes, UK export volumes increased by 3.5%, after three consecutive quarterly declines, leading international trade to add 0.4 percentage points to GDP growth in the first quarter.
“It is clear some frontrunning of trade was in play,” said Sanjay Raja, the chief UK economist at Deutsche Bank.
Reeves said the figures showed the government’s plan was working as the British economy had outpaced all of its G7 peers in the first quarter.
“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,” she said.
Keir Starmer’s government has sought to insulate Britain from the international fallout by striking trade deals and focusing attention on the government’s industrial strategy, including agreeing an accord with Washington to reduce some of Trump’s tariffs on cars, aluminium and steel.
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The UK prime minister also agreed a long-desired trade deal with India, and will next week push for closer trade ties with the EU at a summit designed to “reset” relations with Brussels after Brexit.
Analysts had anticipated bumper growth in the first quarter, after an unexpectedly strong 0.5% expansion in February. In the end the figure came in even higher than forecast as monthly data showed that GDP rose by 0.2% in March. That surpassed City economists’ predictions of zero growth for the month.
Despite surveys of consumer confidence and business sentiment having shown a sharp decline in recent months, British households have so far proven resilient to the heightened economic uncertainty.
That could change over the coming months, as growth is expected to be far weaker as Trump’s tariff policies torpedo business confidence and weigh heavily on international trade.
The Bank of Englandsaid last week Britain’s prospects had worsened amid the heightened global uncertainty over the US president’s trade wars, as it forecast near stagnant activity for the rest of the year.
Mel Stride, the shadow chancellor, said the government’s tax increases would put progress in the economy at risk. “While it’s welcome the economy is growing, both the OBR and IMF have downgraded the UK’s growth.”
