The British economy grew by more than expected in the first quarter of 2025 thanks to a boost from the services and production sectors, according to the Office for National Statistics.
GDP expanded by 0.7 per cent in the first three months of the year, beating forecasts of 0.6 per cent and recording its fastest rate in a year.
March showed the strongest outperformance of economists’ expectations, with the economy expanding by 0.2 per cent compared to forecasts of zero growth.
The FTSE 100 is down 0.6 per cent in early trading. Among the companies with reports and trading updates today are United Utilities, Aviva, B&M and National Grid. Read the Thursday 15 May Business Live blog below.
Trade deal progress welcome but ‘tariffs pour cold water on economic growth’
Rob Morgan, chief investment analyst at Charles Stanley:
‘The economic tectonic plates are still shifting rapidly with potential for reverberations across the globe. While there has been some relief from the temporary rollback of reciprocal tariffs from the US administration, and the UK was first out of the gates with a trade deal, it is barriers between the US and other trading partners, notably China and Europe, that will be of greater impact on the UK’s open economy.
‘Here, things hang in the balance. The agreement between Washington and Beijing to lower tariffs is welcome, but it is only a temporary deal. There’s no guarantee the lower regime established will be rolled over into a new reality.
‘Tariffs pour cold water on economic growth, making businesses delay investments and consumers to be more cautious with their spending. The uneven path to agreements could be set to weigh on global growth for months to come.
‘Meanwhile, the UK’s own trade deal has brought a degree of certainty, but domestic pressures in the form of increased employers’ National Insurance contributions and minimum wages could increasingly weigh on business activity.
‘These kicked in from April, so we’ll see more of the impact in coming months. Again, there is likely to have been a degree of ‘front running’ of activity that flattered the first quarter numbers at the expense of subsequent ones.
‘Overall, it seems likely there will be a loss of impetus for the rest of the year following this strong start.’
Aviva premiums jump 9% ahead of Direct Line takeover
Aviva saw general insurance premiums jump 9 per cent in the first quarter, thanks to strong growth in both personal and commercial lines in Britain, driven by the Probitas deal and new businesses.
The life and general insurer, which operates in Britain, Ireland and Canada, said it was confident of meeting its 2026 outlook.
Aviva’s bid to become the largest home and motor insurer in Britain through a £3.7billion takeover of smaller rival Direct Line suffered a potential snag on Wednesday, after UK’s competition watchdog launched a review of the deal.
‘The acquisition of Direct Line is firmly on track… and we expect to complete the deal in the middle of the year,’ CEO Amanda Blanc said.
B&M names new CEO
Discount retailer B&M has named retail industry veteran Tjeerd Jegen as its new chief executive.
Jegen has held several leadership roles, including CEO of Tesco’s Malaysia unit in 2010 and head of supermarkets and petrol at Australia’s Woolworths from 2011 to 2015.
It follows the retirement of former CEO Alex Russo at the end of April.
Jegen said: ‘I’m honoured to join one of Europe’s leading value retailers at such a pivotal time.
‘Value retail plays a crucial role in the lives of millions of consumers, and I’m passionate about working with the team to drive growth through great products, operational excellence, and a strong customer focus. I look forward to working with the team to build on the company’s strong foundations and take it to the next level’
UK beats Europe in battle for investment for fifth year in a row
IoD: ‘UK growth seems unlikely to maintain its Q1 strength’
Anna Leach, Chief Economist at the Institute of Directors, said:
‘All in all, it is no bad thing that the UK seems to have entered the April turmoil in good economic shape.”
‘UK growth seems unlikely to maintain its Q1 strength over the rest of this year. Tariff turmoil and its impacts on consumer and investment spending will push down on activity in coming months as it delays decision-making and increases the desire for precautionary saving buffers.
‘While consumer spending should continue to be supported by real earnings growth and further falls in interest rates, the labour market is softening rapidly amidst significant increases in employment costs.
‘The sharp rise in uncertainty pushes down further on investment appetite among businesses already seeing profits pressured by rising costs.
‘But amidst the noise, there are a number of notable policies expected from the UK government in the coming weeks: industrial strategy and the 10 year infrastructure plan provide opportunities to cut through and enable businesses to see a sense of direction for the UK economy.’
‘Positive momentum’ in Q1…’real risk of a contraction’ in Q2
Thomas Pugh, economist at RSM UK:
‘On the quarterly spending measure, there was a surge in business investment, which grew by 5.9% and net trade added 0.4ppts.
‘However, the strength of both of these categories is probably due to firms bringing forward activity ahead of US tariffs and April tax increases.
‘Indeed, despite the relatively strong performance of consumer-facing industries in Q1, household spending only rose by 0.2% q/q and government spending contracted by 0.5%.
‘The big, and obvious, question now is how will the recent tariff developments impact that positive momentum.
‘There has been a clear hit to consumer confidence and business sentiment, which will translate into a sharp slowdown in growth in Q2.
‘There is a real risk of a contraction in Q2 as it looks like much of the strength in Q1 was due to firms bringing forward activity.’
GDP beats estimates at 0.7%
The British economy grew by more than expected in the first quarter of 2025 thanks to a boost from the services and production sectors, according to the Office for National Statistics.
GDP expanded by 0.7 per cent in the first three months of the year, beating forecasts of 0.6 per cent and recording its fastest rate in a year.
March showed the strongest outperformance of economists’ expectations, with the economy expanding by 0.2 per cent compared to forecasts of zero growth.
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BUSINESS LIVE: GDP beats estimates at 0.7%; B&M names new CEO; United Utilities profits surge