UK Economy Grows 0.7% in Q1 2025, but the Bounce May Be Short-Lived

Preliminary figures released by the UK’s Office for National Statistics (ONS) on Thursday show that the UK economy grew by 0.7% in the first quarter of 2025. This exceeded economists’ expectations surveyed by Reuters, who had forecasted a 0.6% expansion. Growth in the fourth and third quarters of 2024 was much slower, at 0.1% and zero, respectively.

The growth in Q1 was primarily driven by a 0.7% increase in the services sector. Production also saw notable improvement, growing by 1.1%. Meanwhile, the construction sector remained flat with no growth recorded.

Deutsche Bank economist Sanjay Raja commented that this early-year surge is likely temporary. He pointed to a stronger-than-expected finish to 2024, combined with robust domestic spending and advance trade activity ahead of Liberation Day, as key factors behind the sharp rise.

“We expect GDP growth to reverse in the second quarter of 2025 before gradually picking up over the course of the year, eventually returning to its trend growth rate in early 2026,” he said.

Despite the anticipated short-term slowdown, Deutsche Bank remains cautiously optimistic, noting that risks are skewed to the upside.