UK Economy Grows 0.7%, Reeves Optimistic

The UK economy expanded by 0.7% in Q1 2025 which exceeded expectations of 0.6% according to the Office for National Statistics because of a strong services sector. According to Chancellor Rachel Reeves the data showed “very encouraging” results yet Shadow Chancellor Mel Stride criticized Labour for increasing employer National Insurance rates through their “jobs tax.” The services sector consisting of retail and computer programming services together with production sector growth achieved a 1.1% increase. Real GDP per head increased 0.5% after two consecutive quarters of decline. According to economists Paul Dales and others the economy will likely experience reduced growth because of the April National Insurance increase alongside the 10% US tariffs on UK exports. The first quarter growth was boosted by a 3.5% export surge and business investments in aircraft and IT technology. The UK and US agreed to remove specific tariffs but global economic forecasts remain pessimistic according to the IMF which reduced its projections for the UK. Reeves recognized the cost-of-living problems yet Reform UK leader Richard Tice made predictions about tax-driven economic slowdowns. The economic data supports Labour’s policy focus but faces negative impacts from trade instability and internal tax burdens which threaten a less successful second half of the year.