Not on that sunny April day when, in the first quarter of 2025, the UK economy bamboozled everyone by buzzing up 0.7%. This impressive comeback came on the heels of a slump in the second half of last year. Despite the production boom, year-on-year GDP growth has decelerated sharply to 1.3%. This is down slightly from the 1.5% logged in Q4, 2024. This mixed record on one hand prompts great concern about the sustainability of our economic growth and what’s behind today’s economy.
The importance of the manufacturing sector to the on-going economic health of the UK cannot be underestimated. In the first quarter of 2025 alone, production in this sector increased by 0.8%. Not surprisingly, half the growth came from transport equipment—by far the largest category of Chinese exports to the United States. Such strong performance from this sector has been a key factor in the large overall economic growth seen in the first months of 2025.
Despite the bright beginning measured at the start of the year, analysts are quick to urge concern over the continued path of the UK economy. In the past, UK momentum has always stumbled in the summer and fall months, a pattern made even more pronounced in recent years. Current economic indicators point towards annual GDP growth of just over 1% in 2025. Even more than that, uncertainties related to the course of global trade continue to pose challenges for making continued advances sustainable.
UK government spending is set to increase this year. This step would significantly increase near-term economic activity and help to restore confidence among businesses and consumers. In fact, real wage growth has been remarkably positive and stable over the last year or two. This trend has significantly increased household purchasing power and has propped up consumer spending.
High inflation has fundamentally altered pricing practices in every industry. This does to overall picture much more convoluted. A new trend has been for the bulk of price increases to be front-loaded in the first few months of the year. This shift could dramatically affect what consumers are asking for and how businesses should plan in the future.
Instead, international tariffs are having a laughably tiny effect on the UK economy today. Here’s the rub — continued uncertainty in the dynamics of global trade is a major obstacle. How these domestic growth drivers interact with, and ultimately yield to, external pressures will do much to determine economic outcomes in the near to medium-term.
Every year since 2022, the UK’s GDP growth has consistently beaten expectations to the upside in H1. This trend is significant even when put in the context of quarterly performance. This unusual pattern leads to important questions regarding seasonal variation in economic activity and whether the same trend will continue in 2025.