GDP rise and a less scary outlook offer Rachel Reeves some rare cheer

Heather Stewart Economics exertion

Thu, May 15, 2025, 1:25 AM 3 min read

The faster than expected UK maturation successful the archetypal 3 months of the twelvemonth is invited quality for a Labour authorities hopeless to marque bully connected its committedness of kickstarting the economy.

Under siege from Nigel Farage’s Reform and nether unit from its ain MPs implicit taxation and spend, Labour volition present constituent to the 0.7% summation successful GDP implicit the archetypal quarter arsenic grounds the hard yards are starting to wage off.

It follows 2 sickly quarters aft Labour came to powerfulness past year, shouting astir its terrible economical inheritance. GDP maturation was zero successful July-September 2024, and lone 0.1% successful the last 3 months of the year.

The Office for National Statistics said the strongest impetus for maturation successful the archetypal 4th of 2025 came from the services sector, wherever determination was a 0.7% summation successful output, though manufacturing besides contributed positively. Construction, which Labour is relying connected for 1.5m caller homes, was flat.

It is tempting to spot these comparatively upbeat figures arsenic a “before” representation – a snapshot of the UK system earlier Donald Trump’s commercialized tariffs were announced connected his “liberation day” astatine the commencement of past month. Indeed, immoderate analysts are informing that businesses whitethorn person pulled enactment guardant into the archetypal 4th to get up of the looming tariff blitz.

However, the US-China deal earlier this week has made the commercialized representation markedly little scary. Even earlier that, the Bank of England estimated the interaction connected UK maturation would beryllium a manageable 0.3% implicit 3 years – portion little commodity prices would assistance to carnivore down connected inflation.

Of course, Trump’s erratic attack means each that could alteration successful a azygous property conference. But a satellite with 30% full US tariffs connected China – and 10% connected the UK after negotiations with the White House – should beryllium much manageable than 1 wherever the world’s 2 largest economical powers are efficaciously operating a commercialized embargo.

Meanwhile, Reeves’s arguable £25bn leader nationalist security contributions (NICs) emergence lone came into unit successful April, aft the information successful Thursday’s merchandise was collected. However, if the argumentation were going to pb to an abrupt question of redundancies, it seems apt these would person started to amusement up much intelligibly already successful surveys of the jobs market.

Recent labour marketplace figures do amusement a marked slowdown, but 1 that was already good nether way. The NICs alteration is apt to amusement up successful immoderate operation of weaker wage growth, higher prices and slower hiring successful the coming months – but truthful acold astatine slightest determination is small motion that this is apt to extremity into the employment situation of which some concern groups warned.