The UK economy grew by 0.7% in the first quarter of 2025, its strongest performance in over a year and better than expected. Growth was driven mainly by the services sector, stronger industrial output, and a 5.9% jump in business investment.

Chancellor Rachel Reeves highlighted that the UK outpaced other major economies such as the U.S., Germany, and France in early 2025. However, economists warn that this momentum may not last. Rising business taxes, a higher minimum wage, and new U.S. trade tariffs could slow growth later this year.

The Bank of England expects overall growth of just 1% for 2025, with only a modest pickup over the next few years.

Despite these headwinds, consumer spending remained resilient in March and April, and a new trade deal with the U.S. may help offset some of the pressure from tariffs.

In short, while Q1’s numbers are encouraging, businesses and investors should stay prepared for a more challenging economic environment in the months ahead.