The UK economy has eventually had its moment in the spotlight. Many experts, independently of one another, confirmed the strong growth of the British economy in the first quarter of 2025.
According to ING analysts, the UK economy has gained momentum in the first quarter of this year, as confirmed by the final gross domestic product data. However, there is no room for complacency—challenging times lie ahead.
Data published by the UK’s Office for National Statistics confirmed that the country’s GDP grew by 0.7% sequentially in Q1 2025. The British economy expanded by 1.3% from a year ago.
This is an impressive result, considering the country showed virtually no growth in the second half of 2024. According to ING analysts, the UK economy “came back to life” in the first quarter after a prolonged period of stagnation. “Is this the Trump effect? Possibly, but only partially. In the first three months of 2025, UK manufacturing rose by 0.8%, with transport equipment—Britain’s primary export to the US—accounting for the bulk of that growth,” the experts added.
The situation shifted in April, when US President Donald Trump’s unpredictable trade policy came into force, including the introduction of sweeping tariffs. Against this backdrop, UK GDP fell by 0.3% month-on-month, more than the anticipated decline of 0.1%.
“After four months of growth, April saw the largest monthly drop on record in UK goods exports to the US. Most categories of goods saw declines following the newly introduced tariffs,” Liz McKeown, Director of Economic Statistics at the UK’s Office for National Statistics, noted.
In response to the situation, the Bank of England decided to keep interest rates unchanged at 4.25% per annum. Meanwhile, core inflation in May 2025 stood at 3.4%, way above the official 2% target.
The central bank expects the key interest rate to rise to 3.7% by September and remain near 3.5% through the end of the year. Previously, Bank of England Governor Andrew Bailey stated that the recent uptick in inflation had “increased uncertainty around the outlook for price growth.” He also highlighted signs of weakening in the UK labor market.
“In recent months, there has been growing evidence of emerging excess supply, particularly in the labor market,” Bailey pointed out. He added that uncertainties remain “regarding the overall balance between supply and demand in the economy.”
Despite the mixed nature of the current situation, there is some good news: employers’ confidence in the domestic economy has reached its highest level in nine years. Companies are now more optimistic about the country’s economic outlook. Lloyds’ Business Barometer inched up by one point to 51, its highest reading since November 2015. This marks the most positive development following April’s downturn, when President Trump announced steep tariff hikes, which were later suspended.
