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UK Economy Grows 0.7% in Q1, Outpacing G7 Peers

The UK's first-quarter growth, driven by services and production, exceeded forecasts but faces challenges from US tariffs and domestic tax hikes in the months ahead.

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A view of the London skyline, Britain, October 14, 2020. REUTERS/Matthew Childs/File Photo
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Overview

  • The UK economy expanded by 0.7% in the first quarter of 2025, surpassing the 0.6% growth forecast and marking its fastest pace in a year.
  • Services, the largest sector of the UK economy, and production output were key drivers of growth, with production rising 1.1% after prior declines.
  • March GDP grew by 0.2%, slowing from February's 0.5%, as businesses and consumers began to show caution ahead of April’s tax and tariff changes.
  • US President Donald Trump’s 'Liberation Day' tariffs and the UK’s employer National Insurance hikes, introduced in April, are expected to dampen growth in Q2.
  • The Bank of England has revised its 2025 growth forecast to 1%, but analysts warn the Q1 boost is temporary, with GDP likely to slow before returning to trend by 2026.