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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 affect 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 improve 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.
Progress was widespread throughout providers and manufacturing, and marked the quickest month-to-month tempo since March 2024.
Chancellor Rachel Reeves stated: “These progress figures are an encouraging signal, however we’re not complacent.”
“The world has modified, and we have now witnessed that change in latest weeks. I do know that is an anxious time for households who’re anxious about the price of dwelling and British companies who’re anxious about what this alteration means for them.”
The GDP figures predate Trump’s announcement on April 2 that he would impose steep import tariffs on most international locations on the planet, together with a ten per cent levy for the UK. The transfer triggered a pointy fall in international inventory markets and prompted fears of a recession on each 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 financial system gained floor in February however tariffs look set to stall progress,” stated Yael Selfin, chief economist at consultancy KPMG UK.
“Ongoing commerce volatility is about to considerably hamper enterprise sentiment and constrain funding plans over the approaching yr,” she added, noting that the autumn in vitality costs following the tariffs announcement “might go a bit of method to mitigate the affect”.
The rises in enterprise taxes which got here into impact this month will even hit exercise this yr, alongside the affect of upper US tariffs, based on Ruth Gregory, economist at Capital Economics. This implies progress can be “decrease than our below-consensus forecast of 0.8 per cent in 2025 and 1.2 per cent in 2026”, she stated.
Buyers anticipate that the Financial institution of England will reduce rates of interest in Could, after which decrease borrowing prices twice extra earlier than the top of the yr.
“With financial progress set to gradual, the financial institution is prone to step up the tempo of rate of interest cuts to assist the home financial system,” stated Selfin.
Separate ONS commerce knowledge revealed on Friday confirmed that exports of products to the US, together with valuable metals, elevated by £500mn in February 2025, marking the third consecutive improve. They’re on the highest stage since November 2022, suggesting that companies try 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 Could 2024.
In February, manufacturing manufacturing was a lot stronger than anticipated with a 2.2 per cent improve. Output within the providers sector rose 0.3 per cent, whereas building elevated 0.4 per cent.
Liz McKeown, ONS director of financial statistics, stated: “The financial system grew strongly in February with widespread progress throughout each providers and manufacturing industries.”
She stated laptop programming, telecoms and automobile dealerships all had sturdy months, whereas in manufacturing, electronics and prescribed drugs led the way in which. Automotive manufacturing additionally picked up after its latest poor efficiency.
