UK growth in February smashes low expectations
The UK economy grew by 0.5 per cent in February, official data has shown, beating forecasters’ expectations by a wide margin.
A Bloomberg poll of economists predicted growth to come in at 0.1 per cent for the month.
UK GDP grew 0.6 per cent in the three months to February, the Office for National Statistics (ONS) also revealed.
“Within services, computer programming, telecoms and car dealerships all had strong months, while manufacturing electronics and pharmaceuticals led the way and car manufacturing also picked up after its recent poor performance,” Liz McKeown, a director at the ONS, said.
Growth in January was also revised up from a previous contraction of 0.1 per cent to zero change in GDP.
The figures were described as an “encouraging sign” by Chancellor Rachel Reeves but it remains well below the government’s much higher target.
“We are not complacent,” Reeves said. We must keep going further and faster on our Plan for Change.
Any hopes that the UK economy will spring into action later in the year are likely to be dashed by global economic shocks that continue to weigh on business confidence.
President Trump tariff announcements have sent markets into free fall over the last week, with his offering of a 90-day reprieve for all countries expect China failing to ease concerns.
Quilter investment officer Marcus Brookes said while new GDP figures were a “sign of improvement”, Trump’s flip-flopping was not good news for the UK.
“If anything, the UK has lost a competitive edge having previously got off lightly in Trump’s announcement last week,” he said.
“This global economic uncertainty is going to do very little for consumer or business confidence in the UK and as such growth will continue to be lacklustre.”
Reeves said the government would be “pragmatic and cool-headed” as it sought to secure a trade deal with the US.
But high employments costs, exacerbated by Reeves’ £25bn increase to national insurance contributions, and the prospect of a fresh tax grab later this year have also put thousands of firms on edge.
Capital Economics’ Ruth Gregory pointed out that the recent figures would not impact bleak growth forecasts.
“The big picture is that the economy has grown in only four of the last nine months and it’s hard to see the economy strengthening much from here,” she said.
“The rises in business taxes kick in from April and the clear risk is that the second-order effects of higher US tariffs on the UK economy causes GDP growth to be lower than our below-consensus forecast of 0.8 per cent in 2025.”
The Office for Budget Responsibility was the last central forecaster to revise its GDP forecast down as it said the UK economy would grow by just one per cent this year.
Institute for Fiscal Studies (IFS) chief Paul Johnson claimed that the OBR gave the Chancellor the benefit of the doubt and took an optimistic view on growth.
Its forecast was published before President Trump unleashed tariffs on China.
The Bank of England meanwhile said in February the UK economy would grow at a sluggish pace of 0.75 per cent.
Monetary Policy Committee members Clare Lombardelli and Sarah Breeden, who are involved in the publication of the Bank’s central forecasts, have said the tariffs are likely to depress growth.
The comments signal that the Bank could yet forecast even lower growth for the UK this year.
A recent consensus of ten forecasters estimated that the UK will grow by 0.8 per cent.