The UK economy grew by 0.6% in the first quarter of 2025, according to new data from the Office for National Statistics (ONS), offering a stronger-than-expected signal that the country is emerging from last year’s recession. The performance marks the fastest quarterly growth since early 2022 and follows a slight contraction of 0.1% at the end of 2024.
The uplift was driven primarily by gains in the services sector, which includes retail, hospitality and professional services. ONS figures also show modest growth in manufacturing, while construction output remained flat. The rebound has prompted cautious optimism among policymakers and business leaders, particularly amid continued global economic headwinds.
Chancellor Rachel Reeves described the figures as a “turning point” and evidence that the government’s focus on stability and investment is beginning to take hold. However, economists warn that underlying pressures — including sluggish productivity, high borrowing costs and trade frictions — are likely to weigh on growth through the second half of the year.
The Bank of England, which cut interest rates to 4.25% earlier this month, has warned that US tariffs on UK goods could shave 0.3% off UK output over the next three years. Analysts at Capital Economics noted that while the Q1 data provides a welcome boost, the wider picture remains mixed, with business investment still subdued and household budgets under pressure from persistent core inflation.
The National Institute of Economic and Social Research has also trimmed its full-year UK growth forecast to 1.2%, down from 1.5% earlier this year, citing weak external demand and tightening fiscal conditions. With a general election expected within the next 12 months, economic performance is set to remain a central political battleground.
Still, today’s figures may strengthen the Treasury’s position ahead of budget negotiations and lend momentum to ongoing infrastructure and innovation initiatives. Whether the recovery proves durable will depend on the government’s ability to navigate global trade uncertainty, support domestic demand, and deliver on its productivity agenda.
