The United Kingdom posted its fastest quarterly economic growth since early 2024, with Gross Domestic Product rising by 0.7% between January and March 2025, official figures from the Office for National Statistics (ONS) confirmed on Monday.
The surge was driven by a sharp increase in housing transactions ahead of a property tax break deadline and a boost in manufacturing output, spurred by expectations of new U.S. tariffs.
The ONS noted that the revised growth figure for March alone rose to 0.4%, up from an earlier estimate of 0.2%, further cementing the strength of the first quarter. In contrast, GDP growth in the final quarter of 2024 was just 0.1%.
Despite the positive momentum, early indicators suggest the bounce may be temporary. Preliminary data for April points to a 0.3% contraction, attributed to short-term disruptions. The Bank of England projects a slower 0.25% growth rate for the second quarter.
Finance Minister Rachel Reeves welcomed the rebound, expressing optimism that continued growth could reduce the need for additional tax measures as the government works toward fiscal targets.
A significant factor behind the Q1 spike was a wave of property purchases completed before the March 31 expiration of a homebuyer tax relief. Consumer spending rose by 0.4% — revised up from 0.2% — with strong demand in housing, transport, and household services. Households drew from savings to finance the uptick in spending, though the savings ratio remained healthy at 10.9%.
Manufacturing also saw a lift early in the year, as firms increased output ahead of potential import tariffs from the U.S. Some of those tariffs have since been paused, easing short-term trade tensions.
Thomas Pugh, Chief Economist at RSM UK, said the recent slowdown in consumer activity and hiring was likely a temporary reaction to policy uncertainty. “Now that some of that uncertainty has cleared, we’re seeing renewed consumer confidence and improving business sentiment,” he said.
Recent employer surveys indicate that optimism about the UK’s economic outlook is at its highest level in nine years. The Bank of England is expected to implement two further interest rate cuts in 2025, potentially supporting continued consumer spending.