15 May 2025
If you are covering the latest UK GDP data, please see the following comment from Lindsay James, investment strategist at Quilter:
“Real GDP is estimated to have grown by 0.7% in the three months to March 2025, compared with the previous quarter. This marks a meaningful improvement and suggests the UK economy is emerging from its recent stagnation with more momentum than expected. Growth was broad-based but largely driven by a strong rebound in the services sector, which continues to act as a pillar of resilience amid lingering global uncertainties.
"Other factors contributing to the better-than-expected data was the strength in sales of motor vehicles, with March, the ‘new plate month’, described by the industry body as the best March performance since 2019. Similarly, the good weather helped get people out and spending.
"This robust performance will offer reassurance to policymakers, especially coming so soon after the Bank of England’s first rate cut of the cycle to 4.25%. While today’s data doesn’t radically shift the economic picture, it does suggest that the UK is on slightly firmer footing than previously feared.
"However, challenges remain. Clearly some sources of strength could be put down to factors such as the change of the Stamp Duty Land Tax threshold, which brought forward purchases. Furthermore, the UK-US trade agreement signed earlier this month, though politically symbolic, is unlikely to deliver immediate economic dividends. While tariffs on select goods such as steel and automotive parts have been eased, a 10% duty remains on many other exports, and concerns are already emerging that the deal could strain UK-China relations, particularly around sensitive technologies.
"Domestically, early signs of cooling in the labour market, with unemployment nudging higher and job vacancies falling, may cap consumer demand going forward. That, combined with sticky core inflation and external pressures such as geopolitical tensions, means the Bank of England will still tread cautiously.
"The stronger GDP data is welcome news, but the bigger question is whether it represents the start of a more durable recovery or simply a temporary rebound. Much will depend on the path of inflation, wage growth, and whether fiscal policy becomes more accommodative. For now, the UK economy is outperforming modest expectations—but the road to sustained growth remains uncertain.”
