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The UK financial system grew 0.5 per cent in February, beating analysts’ expectations and offering some constructive information for chancellor Rachel Reeves as she contends with the influence of US President Donald Trump’s tariffs.
Friday’s month-to-month GDP determine from the Workplace for Nationwide Statistics was above each the 0.1 per cent enhance forecast by economists polled by Reuters and January’s determine of zero progress, revised up from a earlier estimate of a 0.1 per cent contraction.
Development was widespread throughout companies and manufacturing, and marked the quickest month-to-month tempo since March 2024.
Chancellor Rachel Reeves mentioned: “These growth figures are an encouraging sign, but we are not complacent.”
“The world has changed, and we have witnessed that change in recent weeks. I know this is an anxious time for families who are worried about the cost of living and British businesses who are worried about what this change means for them.”
The GDP figures predate Trump’s announcement on April 2 that he would impose steep import tariffs on most nations on the earth, together with a ten per cent levy for the UK. The transfer triggered a pointy fall in world inventory markets and prompted fears of a recession on either side of the Atlantic.
On Wednesday, the US president introduced a 90-day pause on most of his “reciprocal” duties, however the UK’s tariffs stay in place.
“UK economy gained ground in February but tariffs look set to stall progress,” mentioned Yael Selfin, chief economist at consultancy KPMG UK.
“Ongoing trade volatility is set to significantly hamper business sentiment and constrain investment plans over the coming year,” she added, noting that the autumn in power costs following the tariffs announcement “may go a little way to mitigate the impact”.
The rises in enterprise taxes which got here into impact this month will even hit exercise this 12 months, alongside the influence of upper US tariffs, in keeping with Ruth Gregory, economist at Capital Economics. This implies progress could be “lower than our below-consensus forecast of 0.8 per cent in 2025 and 1.2 per cent in 2026”, she mentioned.
Buyers count on that the Financial institution of England will reduce rates of interest in Might, after which decrease borrowing prices twice extra earlier than the tip of the 12 months.
“With economic growth set to slow, the bank is likely to step up the pace of interest rate cuts to support the domestic economy,” mentioned Selfin.
Separate ONS commerce information printed on Friday confirmed that exports of products to the US, together with treasured metals, elevated by £500mn in February 2025, marking the third consecutive enhance. They’re on the highest degree since November 2022, suggesting that companies are attempting to anticipate the incoming US import tariffs.
Within the three months to February the financial system grew 0.6 per cent in contrast with the earlier three months, the quickest tempo since Might 2024.
In February, manufacturing manufacturing was a lot stronger than anticipated with a 2.2 per cent enhance. Output within the companies sector rose 0.3 per cent, whereas development elevated 0.4 per cent.
Liz McKeown, ONS director of financial statistics, mentioned: “The economy grew strongly in February with widespread growth across both services and manufacturing industries.”
She mentioned laptop programming, telecoms and automobile dealerships all had robust months, whereas in manufacturing, electronics and prescription drugs led the best way. Automobile manufacturing additionally picked up after its latest poor efficiency.
