The UK economy saw its fastest growth in more than a year during the first quarter of 2025. Official data from the Office for National Statistics shows that GDP rose by 0.7% between January and March. This is the strongest quarterly increase since early 2024.
A major driver of this growth was a sharp rise in home buying. Buyers rushed to complete deals before a property tax break ended on March 31. This created a strong push in the housing market.
Consumer spending also increased. The growth was revised up to 0.4%, from an earlier estimate of 0.2%. People spent more on housing, transport, services, and household goods. Many households used their savings to cover these costs. Even so, the savings rate stayed solid at 10.9%.
Manufacturing played a key role as well. Businesses raised production early in the year. They were preparing for potential import tariffs from the United States. Some of those tariffs have now been delayed, reducing pressure on firms.
Despite the strong start, the outlook is mixed. Early estimates show a 0.3% drop in output for April. This was caused by a few one-off events that disrupted activity.
The Bank of England expects growth to slow in the second quarter. It now forecasts a 0.25% rise between April and June. Even so, the strong first quarter may ease the need for new tax increases. Finance Minister Rachel Reeves says the trend is encouraging.
Business and consumer confidence are also rising. A recent survey showed employer confidence at a nine-year high. Economists believe the earlier dip in spending and hiring was only temporary.
With two more interest rate cuts expected this year, spending may continue to rise. That could help support further economic growth in the months ahead.
