The British economy expanded by 0.5% month-over-month in February 2025, following a revised flat reading in January and surpassing expectations of a modest 0.1% increase. This marked the strongest monthly performance in eleven months and offered a positive signal amid ongoing global trade tensions and domestic uncertainties. The February print underscored the economy's resilience and hinted at a potential rebound in economic momentum heading into the second quarter.
UK GDP growth beats expectations in February
Industrial production led the charge, surging by 1.5% and rebounding from a 0.5% decline in January. The sector was buoyed by a robust 2.2% increase in manufacturing output, with particular strength seen in high-value industries. Production of computer, electronic, and optical products soared by 9.8%, reflecting continued investment in tech and advanced manufacturing. Pharmaceutical preparations also posted solid gains, rising by 4.4%, possibly driven by restocking efforts and export demand. Meanwhile, utility supply rose by 2%, likely aided by colder weather and increased energy usage, while the mining sector remained a drag, contracting by 3% amid ongoing weakness in commodity extraction.
The services sector, which represents the bulk of the UK economy, expanded by 0.3%, building on a 0.1% gain in January. Growth was particularly strong in high-tech and information-driven industries. Computer programming, consultancy, and related activities rose by 2%, while telecommunications services jumped 3.5%, and publishing activities surged by 6.4%, benefiting from both digital media demand and licensing revenues. These gains suggest that Britain’s knowledge economy continues to provide solid footing even as more traditional sectors face headwinds.
Construction output grew by 0.4%
In the construction sector, output grew by 0.4%, recovering from a 0.3% contraction in the previous month. Growth was led by public sector new work and repair and maintenance projects, pointing to increased government spending on infrastructure and social projects. Private housing activity remained stable, although rising borrowing costs and affordability constraints continue to weigh on the sector's outlook.
Taking a broader view, GDP grew by 0.6% in the three months to February compared to the preceding three-month period, signaling that the economy may be regaining its footing after a sluggish end to 2024. The stronger-than-expected monthly performance could complicate the Bank of England’s policy calculus, as markets had priced in multiple rate cuts for 2025 amid cooling inflation and external risks. With economic activity picking up and core inflation remaining relatively sticky, policymakers may need to weigh growth support against inflation risks more cautiously.
Looking ahead, sustained growth will depend on a delicate balance of domestic demand resilience, fiscal support, and the evolving global trade environment, particularly the ongoing U.S.-China tensions and their impact on supply chains and investor confidence.
