UK economy has best quarter in year

Pickup is a boost for Labour government

- TOM REES PHILIP ALDRICK IRINA ANGHEL

The UK economy enjoyed its strongest quarterly growth in a year before the double blow of tax hikes and US President Donald Trump’s trade war.

Gross domestic product rose 0.7% in the first quarter, an acceleration from the 0.1% increase at the end of 2024, the Office for National Statistics (ONS) said yesterday. It was above the 0.6% expected by the Bank of England and private-sector economists.

Output in March alone grew by 0.2%, instead of stagnating as economists had forecast. It suggests businesses and consumers were holding up a month before a huge tax hike hit employers and Trump was due to announce sweeping global tariffs. Services and construction both grew strongly, offsetting a sharp fall in manufacturing.

The pound gained after the strong data, up 0.2% to $1.3289. Money markets trimmed bets on Bank of England (BoE) interest-rate cuts slightly, pricing in 40 basis points more easing by the end of the year, which means one quarter-point cut is fully priced with around 60% chance of another.

The pickup is a boost for Keir Starmer’s Labour government, which has struggled to get the economy motoring since winning power last summer.