UK is fastest-growing G7 country in Q1 2025, as US exports jump ahead of trade war – business live | Business
UK was fastest-growing G7 member in Q1 2025
Britain has outpaced major international rivals for growth in the first quarter of this year, by accelerating in January-March.
The UK’s 0.7% growth in Q1 2025 shows it was the fastest-growing economy in the G7 during the last quarter – a clear boost for the government this morning.
In contrast, US GDP contracted slightly due to a surge of imports to beat Donald Trump’s trade war.
Now, we don’t get Japan’s GDP report until tomorrow morning (a small contraction is expected), and Canada’s data is only an early estimate.
But as things stand, here’s the G7 growth league table:
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UK: +0.7% growth
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Canada: estimated to have grown by 0.4%
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Italy: 0.3% growth
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Germany: 0.2% growth
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France: 0.1% growth
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US: -0.075% (or -0.3% on an annualised basis)
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Japan: reporting tomorrow, -0.1% forecast
UK GDP growth of 0.7% QoQ in Q1 2025 (+0.5% on a per capita basis) puts the UK at the top of the G7 league table. Encouraging underlying resilience, although recent surveys (PMIs, labour market surveys) since April tax and trade changes do point to a considerable slowdown in Q2. pic.twitter.com/4mZpkfUWI7
— Simon French (@Frencheconomics) May 15, 2025
Key events
UK mortgage repossessions rise
There’s been a worrying jump in mortgage repossessions this year.
New data from the Ministry of Justice show that, compared to the same quarter in 2024, there were increases in mortgage possession claims from 5,182 to 6,765 (31%), orders from 3,013 to 4,624 (53%), warrants from 2,919 to 3,517 (20%) and repossessions by county court bailiffs from 769 to 1,092 (42%).
This is another sign of the financial pressures on households, despite the recent cuts to UK interest rates.
Adam Butler, public policy manager at StepChange Debt Charity, says:
“This is an incredibly uncertain time for mortgage holders. While last week the Bank of England cut the base rate by 0.25%, which could provide some relief for borrowers, it’s unlikely it’ll have an immediate, meaningful impact for those who are struggling to keep up with mortgage payments. Although overall mortgage arrears remain low, the rise in possessions raises concerns that those already struggling may be especially at risk of falling into problem debt.
“Last year among our clients with a mortgage, we saw average mortgage arrears jump by a staggering 69% – from £6,054 in 2023 to £10,239 in 2024. At the same time, households are being hit with a fresh wave of cost increases, including higher energy bills, council tax, and water bills, further stretching already tight budgets.
“If you are worried about meeting your mortgage payments, don’t hesitate to get in touch with your lender, who can offer support and forbearance options. If you’re struggling with debt, know that you’re not alone – a charity like StepChange is here to help with free and impartial advice.”
UK cuts stake in NatWest to 0.9%
Newsflash: The UK government has moved a step closer to selling all its stake in NatWest bank.
The Treasury’s stake in NatWest has now fallen to 0.90%, down from 1.98% previously.
The government has been trimming its stake by selling NatWest shares back to the market, cutting a stake which it took when it rescued Royal Bank of Scotland (as it was then called) in 2008.
Last year, the then-Conservative government. had planned to sell the stake to the public in a flashy “Tell Sid”-style campaign (harking back to the Thatcher privatisations of the 1980s), but that plan was scuppered by the general election.
Eurozone growth lowered to 0.3%
Disappointing growth news – the eurozone didn’t expand quite as quickly as first estimated in the first quarter of this year.
Statistics body eurostat has cut its estimate for eurozone growth in Q1 2025 to +0.3%, down from its initial estimate last month of +0.4% growth.
Ireland recorded the fastest rise in GDP – up 3.2% in the quarter, due to increased activity at its multinationals. Contractions were measured in Slovenia (-0.8%), Portugal (-0.5%) and Hungary (-0.2%).
This updated data confirms that the UK outpaced Germany (+0.2%), France (0.1%) and Italy (+0.3%).
Direct debt failures on energy and water bills jump
The number of UK customers defaulting on their energy and water bills has jumped, a sign of the pressures on households.
The Direct Debit failure rate for “Electricity and Gas” bills rose by 27%, year-on-year, last month, from 2.13% in April 2024 to 2.71% in April 2025.
Water bill direct debit failures rose by 14%, from 0.96% to 1.09%.
Overall, the seasonally adjusted “Total” Direct Debit failure rate for April 2025 decreased by 1% from March 2025, but increased by 5% from April 2024.
Reeves: economic headwinds are coming
UK chancellor Rachel Reeves has said there are clearly economic headwinds approaching, Reuters reports.
Asked if the strong growth in Q1 was sustainable, Reeves told reporters:
“There’s clearly economic headwinds, and the world is changing. We can see that all around us, but we are a strong economy.
Reeves also emphasised the significance of the government’s recently-announced trade agreements with the United States and India.
She said the government was “working through the detail” on the U.S. deal – a limited bilateral trade agreement that leaves in place Trump’s 10% tariffs on British exports.
Starmer: The UK now has the fastest growth in the G7
Prime minister Sir Keir Starmer has welcomed today’s UK GDP data, saying the government is meeting his target of having the highest growth in the G7 group of leading democracies.
As we covered at 7.29am, the UK’s 0.7% growth in January-March beats the US, France, Germany and Italy, and will probably outpace Canada and Japan too.
Sir Keir said:
“The UK now has the fastest growth in the G7 – our plan for change in action.
“We’ve had four interest rate cuts since July and wages are rising faster than prices.
“But I know the Tory cost of living crisis isn’t over – we will go further and faster to deliver for working people.”
Our Politics Live blog is tracking all the reaction in Westminster to the growth report:
Global oil demand to slow this yea, IEA predicts
The International Energy Agency (IEA) has forecast that demand for oil will slow this year, due to economic headwinds and record sales of electric vehicles.
In its latest monthly report, the IEA predicts that global oil demand growth will slow from 990,000 barrels per day in the first quarter of 2025 to 650 kb/d for the remainder of the year.
OIL MARKET: @IEA pegs global oil demand growth in 2025 at 740,000 b/d and at 760,000 b/d in 2026 (that’s slightly better than its forecast in May of 730,000 b/d for this year and 690,000 b/d for next year). #OOTT
— Javier Blas (@JavierBlas) May 15, 2025
The IEA reckons signs of a slowdown in global oil demand growth may already be emerging. It says:
Oil prices resumed their downward trajectory in late April and early May as trade tensions impacted financial and commodity markets and OPEC+ agreed to a further unwinding of production cuts.
Bearish sentiment subsequently eased somewhat after the United States reached a trade deal with the United Kingdom on 8 May, and a 90-day accord with China on 12 May. Nonetheless, increased trade uncertainty is expected to weigh on the world economy and, by extension, oil demand.
FTSE 100 drops as Iran nuclear deal hopes hit oil price
Britain’s forecast-beating growth hasn’t brought much cheers to the London stock market.
The FTSE 100 index of blue-chip shares has dipped by 0.5% in early trading, down 40 points at 8544 points.
Oil companies are among the fallers, with BP falling by 4.6% and Shell down 3%.
That follows a 3% drop in the oil price this morning, on hopes of a US-Iran nuclear deal, with Brent crude trading around $64 per barrel.
Oil is lower after US president Donald Trump said today that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had “sort of” agreed to the terms.
“We’re in very serious negotiations with Iran for long-term peace,” Trump said on a tour of the Gulf, according to a pool report by AFP.
A deal could lead to sanctions relief for Iran, releasing more oil onto the market.
UK to. invest £630m on clean energy upgrades
Jillian Ambrose
Away from the UK GDP data…Schools, care homes, hospitals and community centres are in line for more than £630m in government funds to fit heat pumps, solar panels, insulation and double glazing to help cut the energy bills of public buildings.
The government revealed the allocations for the Liverpool City Region Combined Authority, the Northumbria NHS Foundation Trust, the Royal Air Force Museum Midlands, Worcester City Council and the University of York, promising an estimated £650m in savings for taxpayers every year for the next 12 years.
Its latest clean energy drive was revealed hours after legislation passed to set up its state-owned energy company Great British Energy late on Wednesday.
GB Energy was a key pillar of the Labour government’s election manifesto and has pledged to back the company with £8.3bn over the course of this parliament to invest alongside the private sector in community energy projects and new technologies like floating offshore wind.
GB Energy’s chair Juergen Maier said the company was created “to ensure British people reap the benefits of clean, secure, homegrown energy”.
Maier added:
“We now have full backing to scale up the company, crowd in investment, and back clean energy projects across the country.”
Energy secretary Ed Miliband will soon outline GB Energy’s strategic priorities – including which technologies it will focus on and how it should consider the public benefits from investment decisions.
UK exports to US jump ahead of trade war
Britain’s exports to the US have hit their highest level in over two years, helping to boost growth and narrow the UK’s trade deficit.
Exports of goods to the United States increased by £2.4bn in January to March, to £17.5bn, the highest level since the fourth quarter of 2022.
This could suggest a rush of demand to import goods into the US before Donald Trump announced his new tariffs on early April.
The ONS explains:
As this release covers trade up to March 2025, there will be no direct impact of tariffs on this data. However, this pattern of increasing exports could be a sign of changing trader behaviour ahead of tariff introduction.
UK imports from the US rose by less, increasing by £1.3bn, helping to boost the UK’s trade balance.
Paul Dales, chief UK economist at Capital Economics, says this will have added to GDP:
Moreover, net trade added a further 0.4ppts to GDP growth as a 3.5% q/q rise in exports more than offset a 2.1% q/q gain in imports. Again, some of that was probably a result of activity being brought forward from Q2 ahead of US tariffs.
Dales adds:
Overall, the main reason why GDP was stronger than everyone expected appears to be because US and UK tax changes meant that more activity was pulled forward into Q1 from Q2 than everyone expected, rather than because the UK economy is fundamentally stronger.
This means Q2 may well be weaker than widely expected (before today our forecast was 0.0% q/q) and the best part of the year may already be behind us.
Raj Badiani, economics director, Europe at S&P Global Market Intelligence, says:
The UK economy enjoyed a large boost from rising exports in the first quarter, suggesting some stockpiling of exports from the UK ahead of the imposition of a higher US tariff in early April.
Economists fear growth rebound is unlikely to last
Disappointingly, economists are predicting that the UK won’t sustain its strong growth.
The Resolution Foundation thinktank fears UK growth stumbled in April – the month when Donald Trump’s trade wars rattled the world economy.
Simon Pittaway, senior economist at the Resolution Foundation, says:
“The UK economy has made a stronger than expected start to 2025, growing at a healthy 0.7 per cent.
“But this growth rebound is unlikely to last, with data for April looking far weaker, and huge tariff-shaped clouds hanging over the global economy.
“These growth headwinds are all the more alarming given Britain’s recent economic record – with GDP per person still lower today than it was before the pandemic.”
Matt Swannell, chief economic advisor to the EY ITEM Club, predicts that quarterly GDP growth across the rest of this year is likely to be slower than in Q1, explaining:
In part, this is because the activity data in Q1 was probably boosted by some residual seasonality. However, tighter fiscal policy, the lagged effect of past interest rate rises, and the imposition of higher US tariffs on goods exports from the UK and the rest of the world mean we also expect the underlying pace of output growth to remain modest throughout this year.”
One wrinkle in today’s generally decent UK GDP report is that the construction sector stagnated in the last quarter.
Construction output was unchanged January-March, compared with October-December, the ONS reports.
This was due to a 1.2% drop in repair and maintenance work, which wiped out a 0.9% rise in new work.
In March alone, though, construction output grew by 0.5%, following growth of 0.2% in February.
No change for construction as output flatlined in Q1 2025 when compared to the same period in 2024.
That said, March had a sunnier outlook with 0.5% growth reported. This was driven predominantly by both new work, and repair and maintenance, which grew by 0.6% and 0.4%,… pic.twitter.com/0fh87fYoys
— Emma Fildes (@emmafildes) May 15, 2025
Scott Gallacher, director at financial planners Rowley Turton, says:
“Today’s figures will be a welcome boost for Rachel Reeves, finally putting some decent growth on the table. Perhaps there’s hope that the Chancellor’s much-talked-about Growth Agenda may yet deliver.
But we’re far from out of the woods. Construction has flatlined, hardly encouraging when the government is banking on 1.5 million new homes to fuel growth and tackle the housing crisis.
This morning’s strong growth figures will ‘blow away’ talk of a UK recession, points out the BBC’s economics editor Faisal Islam.
Blimey:@ONS reports that the UK economy grew by 0.7% in Q1 of 2025, blowing away the recession talk, and almost certainly the fastest growing economy in the G7 in that period….
— Faisal Islam (@faisalislam) May 15, 2025
Today’s GDP reading is “very good news for the economy”, reports Professor Costas Milas, of the University of Liverpool’s Management School.
He tells us:
GDP grew (quarter-on the same quarter of the previous year) by 1.3% which is higher than the BoE’s estimate of 1.2% based on their latest Monetary Policy Report. This creates a momentum which should revise growth forecasts for 2025Q2 upwards.
Based on my own estimates, GDP in 2025Q1 is around 0.8% below capacity (or equilibrium output). Consequently, the risk for inflationary pressures is quite low and therefore, the MPC can proceed with further interest rate cuts as soon as next month if they decide to do so. The only downside? Today’s GDP reading covers the period before Trump’s Liberation Day (which initiated trade wars).
