UK is fastest-growing G7 country in Q1 2025, as US exports jump ahead of trade war – business live

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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.

Illustration: ONS

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.

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.

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.

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).