The British economy expanded by 1.3% year-on-year in the first quarter of 2025, according to preliminary estimates. While this marked a slight slowdown from the 1.5% growth recorded in the previous quarter, it still surpassed market expectations of 1.3%.
UK GDP grows by 1.3% YoY in the first quarter
The services sector, the main driver of the economy, grew by 1.5%, easing from 1.9% in the fourth quarter. Construction activity maintained a steady pace, with output increasing by 0.9%, matching the previous quarter's rate. Meanwhile, industrial production continued to contract, though the pace of decline moderated to 0.2% from 1.1% previously.
From an expenditure perspective, household consumption growth decelerated to 0.7% from 1.2%, reflecting more cautious consumer behavior amid lingering economic uncertainties. Government spending also softened, rising 1.3% compared to 2.6% in the previous quarter. In contrast, gross fixed capital formation saw a significant acceleration, jumping 4.4% from 2.2%, largely fueled by a robust 8.1% surge in business investment, a sharp improvement from the 1.8% gain recorded in the final quarter of 2024. Exports edged down by 0.3%, though this represented a marked improvement from the 3.5% contraction seen previously, while imports accelerated sharply by 7.6%, up from 5.0%.
QoQ data
On a quarterly basis, GDP increased by 0.7%, marking the strongest expansion in three quarters and highlighting some resilience in the face of global headwinds.
Looking at March 2025 specifically, the UK economy grew by 0.2% month-on-month, ahead of a significant tax increase on employers and an expected announcement from President Trump regarding sweeping global tariffs. The monthly reading exceeded market expectations for flat growth and followed a 0.5% expansion in February. The services sector led the advance, with output rising 0.4%, building on an unrevised 0.3% gain in the previous month. Construction output also picked up, growing 0.5% after a downwardly revised 0.2% increase in February. However, industrial production fell by 0.7%, partially reversing the strong 1.7% rebound recorded earlier. On an annual basis, GDP expanded by 1.1% in March.
