UK economy makes flying start to 2025, but more turbulence ahead

Responding to the latest GDP figures Julian Jessop, Economics Fellow at the Institute of Economic Affairs, said:

“The 0.7% growth in the UK economy in the first quarter is a welcome bounce back from the weakness in the second half of 2024, but still little to cheer.

“The positive headlines should at least help to lift consumer and business confidence and trigger a wave of upward revision to growth forecasts for 2025. The fading fears of a global trade war mean that the risks are now more evenly balanced too.

“Nonetheless, there is no shortage of caveats.

“For a start, growth of 0.7% is still slower than the 0.9% reported in the same quarter of last year, and there are doubts over the quality of the seasonal adjustments.

“Moreover, Q1’s 0.7% growth was flattered by a 5.9% jump in business investment, which appears to be at least partly due to spending brought forward ahead of Trump’s tariffs. Consumer spending rose by just 0.2%, despite the gains in real incomes.

“Most importantly, these figures cover a period before the big jumps in employment costs in April. Surveys of private businesses suggest that these cost increases hit activity hard and that many more job losses are coming.

“Businesses also continue to struggle under the weight of high energy costs and more red tape.

“In short, the flying start to 2025 is likely to be as good as it gets.”