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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 impression 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 development, revised up from a earlier estimate of a 0.1 per cent contraction.
Progress was widespread throughout companies and manufacturing, and marked the quickest month-to-month tempo since March 2024.
Chancellor Rachel Reeves stated: “These development figures are an encouraging signal, however we aren’t complacent.”
“The world has modified, and now we have witnessed that change in latest weeks. I do know that is an anxious time for households who’re fearful about the price of residing and British companies who’re fearful about what this variation 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 earth, 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 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 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 12 months,” she added, noting that the autumn in power costs following the tariffs announcement “could go slightly solution to mitigate the impression”.
The rises in enterprise taxes which got here into impact this month may also hit exercise this 12 months, alongside the impression of upper US tariffs, in accordance with Ruth Gregory, economist at Capital Economics. This implies development 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 minimize rates of interest in Might, after which decrease borrowing prices twice extra earlier than the top of the 12 months.
“With financial development set to gradual, the financial institution is prone to step up the tempo of rate of interest cuts to help the home financial system,” stated Selfin.
Separate ONS commerce information revealed on Friday confirmed that exports of products to the US, together with treasured 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 Might 2024.
In February, manufacturing manufacturing was a lot stronger than anticipated with a 2.2 per cent improve. Output within the companies 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 development throughout each companies and manufacturing industries.”
She stated pc programming, telecoms and automotive dealerships all had robust months, whereas in manufacturing, electronics and prescription drugs led the best way. Automotive manufacturing additionally picked up after its latest poor efficiency.
