After UK GDP grew by more than expected in the first quarter of 2025, wealth managers discuss the impact and outlook for the economy.

New data from the Office for National Statistics shows that UK GDP grew by 0.7 per cent in the first quarter of 2025, stronger than the 0.6 per cent that was forecast. It was helped by increases in consumer spending and business investment.

UK Chancellor of the Exchequer Rachel Reeves said the UK economy is “beginning to turn a corner.” However, the figures came just before US President Donald Trump imposed sweeping import tariffs which is expected to impact growth. The International Monetary Fund (IMF) has recently downgraded its forecasts for the global economy and the UK Shadow Chancellor Mel Stride said it was “a bit premature to be popping the champagne corks.”

The figures came out a a time when wealth managers are trying to work out the likely hit to the UK from the US tariffs, as well as the impact from the hikes to domestic UK payroll taxes (aka National Insurance Contributions), and as employers brace for new labour market regulations. For years, the relatively sluggish growth of the UK has been an issue, prompting calls for changes to land zoning laws, regulations, tax and infrastructure spending, among others.

Here are some reactions from wealth managers to the figures.

Isaac Stell, investment manager at Wealth Club
"With the winds of tariff turmoil whipping up economic seas, today's better-than-expected GDP figures for the UK show an economy that has so far been able to navigate itself to calmer waters. It could be easy to get carried away by today's positive surprise, but the winds of tariff turmoil are yet to be fully appreciated in the figures. It was only a few days after the quarter end that the ‘Liberation Day’ tariffs were announced and the impact from the tariff-induced storm will likely have pitched the economy onto a different path, at least in the short term.

“Navigating back to port is likely only to get harder in the coming months due to the higher living wage and National Insurance rises that came into effect in April, coupled with the tariff turmoil, this could make for a bumpy economic ride for the rest of the year.”

George Brown, senior economist, Schroders
"It is encouraging to see the UK economy begin 2025 on a firm growth footing. But growth in the years since the pandemic has followed a common pattern of strong starts that later fizzle out, pointing to seasonal adjustment issues. In any case, UK growth looks set to moderate later this year. While a UK-US trade deal will see the US lower tariffs on some goods, the UK, as a highly open economy, will still suffer from any global slowdown. This will put further pressure on the public finances, potentially requiring the Chancellor to opt for spending cuts or tax hikes, or some combination of the two."

George Holmes, managing director of Aurora Capital
“Today’s GDP figures are a welcome surprise, but small businesses won’t be celebrating just yet. For many business owners, this growth doesn’t reflect what they’re seeing on the ground: rising costs, cautious customers and growing uncertainty about the months ahead. There’s no doubt the economy did better than expected at the start of the year, but we need to be clear about why. A lot of activity was pulled forward to beat April’s rise in employer taxes and the threat of US tariffs. For small businesses, especially, that is not a sign of sustained momentum. It is a sign that they are firefighting in an attempt to stay one step ahead of policy shocks.The danger now is complacency. If this uptick is used as a reason to delay support or to justify a slowdown in interest rate cuts, it will backfire. Growth that is fuelled by short-term reactions won’t last unless it is followed up with practical support for the businesses driving it.”

Benjamin Craig, associate director of R&D incentives at Ayming UK  
“Despite the rise in GDP, there is still real pressure on the government to demonstrate its commitment towards helping businesses scale and innovate. SMEs are the lifeblood of the UK economy, but many are struggling to absorb the impact of tax burdens like the National Insurance hike. Many of the Chancellor’s recently-announced measures such as the pension fund reforms are smart and sensible, but unlocking investment is only the first step. It’s about targeting the right areas of our economy – such as high growth sectors like green tech and manufacturing – that can boost productivity and efficiency. With our own research showing that many businesses are now prioritising survival over innovation, we need to see more collaboration with businesses to truly understand their pain points and what they need to grow.”

Rob Morgan, chief investment analyst at Charles Stanley
“It’s a clear positive to build on for the rest of the year. But like the current run of fine weather, the sunnier outlook for the UK economy may not be set to last. Importantly, the first quarter may reflect a dash for exports ahead of the April US tariff announcements, essentially pulling forward activity from future months. Moreover, 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 that 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.”

Patrick O'Donnell, senior investment strategist, Omnis Investments
“The preliminary estimate showed that the UK economy grew in March, when unchanged was expected, following on from a 0.5 per cent rise in February. This probably won’t move markets all that much. The Bank of England (BoE) has already shown that they were in no rush to change the gradual interest rate cutting cycle, and that was before the bounce in risk sentiment after the weekend. Fixed income has had a pretty torrid start to the month of May and whilst this data set won’t necessarily help, I expect both equities and bonds to retrace some of their recent moves in the second half of the month.”