UK GDP grew by 0.7% in the first quarter of 2025 – its strongest quarterly rise in a year. But while the country is currently outpacing its G7 peers and despite a partial agreement with the United States on tariffs, growth over the full year is expected to slow due to mounting global trade tensions.
The UK economy grew by 0.7% in the first quarter of 2025 compared with the last quarter of 2024 (Office for National Statistics, ONS, 2025). This is the highest increase since the first quarter of 2024 (see Figure 1). The expansion was driven primarily by growth in the services sector, particularly administrative and support services, wholesale and retail trade, and information and communication.
Figure 1: Contributions to quarterly real GDP growth
(Percentage change from previous period)
Source: ONS, author’s calculations.
The UK’s GDP growth outpaced other G7 economies in the first quarter of 2025. While growth in Canada and the United States slowed compared with the last quarter of 2024, key European Union economies – including France, Germany and Italy – recorded modest improvements. Japan is expected to have zero growth this quarter (see Figure 2).
This divergence suggests that uncertainty from US trade policy shifts – particularly since Donald Trump returned to the White House in January 2025 – is weighing more heavily on North American economies than on their European counterparts. Protectionist measures, together with inconsistent messaging from the new US administration, are acting as a drag on economic growth across the continent.
Figure 2: Quarterly real GDP growth in G7 countries
(Percentage change from previous period)
Source: ONS, OECD, the figure for Japan is not available yet and is a forecast from the Asian-Pacific Institute of Research.
Despite the UK’s robust performance in the first quarter, growth looks unlikely be to sustained through 2025. Weaker global demand – exacerbated by trade tensions – is expected to dampen GDP growth in the UK over subsequent quarters.
Reflecting these risks, the International Monetary Fund (IMF) revised its 2025 UK growth forecast downwards in April to 1.1% – a 0.5 percentage point cut from its January projection. This adjustment aligns with expectations of slower growth in the last three quarters of the year.
All G7 economies – which account for 40% of UK exports – are now projected to grow at a weaker pace than initially forecast (see Figure 3). In relative terms, predicted US growth has fallen the most (dropping 0.9 percentage points).
Figure 3: G7: Real GDP growth forecast for 2025
(Annual percentage change)
Source: IMF: World Economic Outlook (WEO) in January and April 2025.
The UK government’s recent efforts to secure a bilateral trade deal with the United States could help to soften the blow of tariffs. The agreement reduces or removes duties on key exports like cars, steel and aluminium. But a baseline 10% levy remains on most UK goods shipped to America, leaving many exporters facing turbulent conditions. The deal also does nothing to address weaker demand in the wider global economy.
While the UK’s first quarter rebound offers welcome relief for both the Treasury and the Bank of England, the outlook remains highly uncertain. With global trade tensions persisting and demand softening, the country’s growth trajectory could weaken in the coming months. Policy-makers should remain vigilant: today’s positive figures may not signal a lasting recovery.
Where can I find out more?
The US-UK deal was reached last week. The issues that are included and excluded, as well as the potential consequences, have been analysed in the following articles.
- The Telegraph has analysed the details of the deal: Trump’s UK-US trade deal: what is Britain getting and what is it giving away?
- The Financial Times (FT) has highlighted concerns of the Chinese authorities about the agreement: China criticises UK trade deal with US
Find out more about economic growth at the Economics Observatory:
- Vince Cable and John Turner explore which policies can best support private sector growth in the UK.
- Can universal basic infrastructure support growth across the UK? Diane Coyle, Stella Erker and Andy Westwood explain how UBI can help to reduce local and regional inequalities and ensure that all places prosper.
- Ed Cornforth analyses which taxes are best and worst for growth.
