Early-year gains ease pressure on Reeves, but economists caution momentum may fade
The UK economy grew by 0.7% in the first quarter of 2025 from the previous quarter, with solid gains in the dominant services sector helping to ease earlier concerns over business sentiment.
The figures come as a boost for Chancellor Rachel Reeves, following warnings from industry leaders that her proposed tax measures could damage employment and economic momentum.
In March alone, gross domestic product (GDP) rose by 0.2%, following a 0.5% increase in February, continuing the economy's modest recovery.
Service output grew by 0.4% in March, up from 0.3% in February, and contributed the most to monthly GDP. On a quarterly basis, the sector also recorded a 0.7% rise.
Meanwhile, production fell by 0.7% in March, reversing some of February's 1.7% growth. Despite the monthly decline, the sector still achieved a 1.1% gain over the quarter.
Construction output rose 0.5% in March, following a 0.2% increase the previous month, but showed flat growth across the first quarter.
GDP grew 0.7% in Quarter 1 (Jan to Mar) 2025.
— Office for National Statistics (ONS) (@ONS) May 15, 2025
Services (+0.7%) and production (+1.1%) both grew, while construction (0.0%) was flat.
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“The economy grew stronger in the first quarter of the year largely driven by services, though production also grew significantly, after a period of decline,” said Liz McKeown, ONS director of economic statistics.
“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.”
For Reeves, the latest GDP 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 said.
Despite the upbeat first quarter data, some economists warn that momentum may fade in the coming months. Uncertainty surrounding the international trade environment — particularly after US President Donald Trump’s sweeping tariff announcement last month is seen as a potential drag on global economic growth.
Shadow chancellor Mel Stride also noted that recent economic outlooks from both the Office for Budget Responsibility and the International Monetary Fund had revised down their expectations for UK growth this year.
“Labour inherited the fastest-growing economy in the G7, but their decisions have put that progress at risk,” he said.
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