The latest official figures revealed that the UK’s economy surpassed expectations by growing 0.7% in the first quarter of the year, exceeding the forecasted 0.6%. The Office for National Statistics (ONS) attributed the growth mainly to the services sector, with significant contributions from production as well. This expansion took place just before the US implemented import tariffs and an increase in UK employer taxes in April, leading analysts to caution that this strong growth rate may not be sustainable.
Chancellor Rachel Reeves touted the latest figures as showcasing “the strength and potential of the UK economy”, noting that the UK outpaced economic growth in the US, Canada, France, Italy, and Germany in the first quarter of the year. However, shadow chancellor Mel Stride highlighted that both the Office for Budget Responsibility and the International Monetary Fund had downgraded the UK’s growth forecast for the year, expressing concerns about the rise in employers’ National Insurance payments and labeling it a “jobs tax”.
Despite the positive news of the growth exceeding expectations in March, with the economy expanding by 0.2%, some experts remain cautious about the sustainability of this growth for the rest of the year. While Liz Martins from HSBC expressed optimism, highlighting increased business investment and strong performance in the service sector, others like Paul Dales at Capital Economics and Simon Pittaway from the Resolution Foundation voiced skepticism, pointing to potential challenges ahead such as the impact of US tariffs and the rise in domestic business taxes.
Annabel Thomas, CEO of Nc’nean Whisky Distillery, expressed confidence in the UK’s prospects despite uncertainties, stating that they would absorb US trade tariffs to maintain stable prices in the US market. Meanwhile, John Inglis, founder of Exactaform, shared concerns about making business decisions amidst the current economic uncertainties, citing challenges posed by tariffs and an increase in National Insurance payments. Inglis emphasized the importance of safeguarding jobs and profitability while navigating the current landscape of uncertainty
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