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
Closing post
Time to recap…
The UK economy grew at the fastest pace in a year between January and March, defying warnings of a collapse in activity, as businesses scrambled to invest and export before Donald Trump’s sweeping tariffs.
The Office for National Statistics said gross domestic product (GDP) rose by 0.7% in the quarter, beating City predictions of a 0.6% rise and continuing an expansion after growth of 0.1% in the final three months of last year.
The strong growth means the UK was almost certainly the fastest-growing member of the G7 group of advanced economies in the first quarter of the year.
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.
— Keir Starmer (@Keir_Starmer) May 15, 2025
Driven by Britain’s dominant services sector, the latest snapshot will bolster the chancellor, Rachel Reeves, after business leaders had warned earlier this year that her tax policies would hit jobs and growth.
However, economists cautioned that growth later in the year was likely to be much weaker, amid concerns over the fallout from Trump’s erratic tariff plans after his “liberation day” announcement on 2 April.
The faster-than-expected UK growth in the first three months of the year is welcome news for a Labour government desperate to make good on its promise of kickstarting the economy.
Under siege from Nigel Farage’s Reform and under pressure from its own MPs over tax and spend, Labour will now point to the 0.7% increase in GDP over the first quarter as evidence the hard yards are starting to pay off.
Less encouragingly… there has been a jump in the number of direct debit defaults on energy and water bills….
…and a rise in UK mortgage repossessions.
In America, the threat of a recession hasn’t totally abated, according to the boss of JP Morgan.
Jamie Dimon told Bloomberg:
“If there’s a recession, I don’t know how big it’ll be or how long it will last.
“Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point.”
Donald Trump has warned Apple to row back on its plans to expand manufacturing in India
Walmart is planning to pass on the impact of new US tariffs to its customers, by raising prices.
And growth in oil demand is set to slow this year, the IEA has warned.
Jamie Dimon warns US recession remains a possibility
The threat of a US recession hasn’t completely lifted, the boss of investment bank JP Morgan has warned.
Jamie Dimon told Bloomberg TV today that recession remains a possibility as tariff fallout continues to buffet global economies.
Dimon said he would defer to economists, who give a US recession “about a 50% chance”, adding:
If there’s a recession, I don’t know how big it’ll be or how long it will last.
“Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point.”
Earlier this week, Goldman Sachs cut its estimate of the chances of a US recession in the next 12 months from 45% to 35%.
Dimon also explained that month some clients are holding back on investments because of all the volatility since Donald Trump began his trade war more than a month ago.
The US is on the brink of a technical recession (two quarterly contractions in a row) after its economy shrank by almost 0.1% in the January-March quarter.
That was the worst performance of any G7 member so far (with only Japan and Canada yet to report Q1 GDP), and much weaker than the UK which posted 0.7% quarterly growth this morning.
The US Q1 contraction was due to a fall in net trade, as US companies imported more goods ahead of Trump’s “Liberation Day” tariff announcement in early April.
US retail sales barely rise in April
Just in: US retail sales growth slowed sharply last month, after a splurge of shopping to avoid new tariffs.
US retail and food services sales rose by just 0.1% in April, the US commerce department reported. That followed a 1.7% surge in spending in March, which was attributed to consumers stocking up on goods before the US trade war kicked in.
US Retail Sales (Apr):
• Headline: +0.1% (est 0.0%, prev R +1.7%)
• Ex-Auto: +0.1% (est 0.3%, prev R +0.8%)
• Ex-Auto & Gas: +0.2% (est 0.3%, prev R +1.1%) pic.twitter.com/ch3LZQHFiQ— Rymond_Inc (@rymondIncKenya) May 15, 2025
US retail sales slowed dramatically to a crawl in April after the surge in front-running purchases in March ahead of tariffs. Spending edged up 0.1% last month. Core sales, however, slipped 0.2% (ex autos, gasoline, bldg mats & food services), which may be an early warning: pic.twitter.com/RUxYW4qjis
— James Picerno (@jpicerno) May 15, 2025
UK lags behind France for foreign investment, again
Phillip Inman
Foreign investment in the UK fell below France for the fifth consecutive year in 2024, revealing the failure of successive governments to attract funds from overseas since the 2016 Brexit vote, new data today shows.
The UK secured 853 FDI projects last year, according to the EY Attractiveness Index – behind the 1,025 projects registered in France and ahead of Germany’s 608.
France as gained 50% more projects since 2014 to take the lead on the European leader board, while the UK has seen the number fall.
EY, which has monitored foreign-direct investment (FDI) for more than two decades, said the UK secured 352 fewer projects in 2024 than at its high point in 2017, when 1,205 projects were recorded.
The study found that all three major European economies – France, the UK and Germany – have struggled to secure foreign investment since the pandemic. Last year they suffered double digit declines on 2023 numbers. The UK’s total fell by 13%, France by 14% and Germany by 17%.
Europe overall saw a 5% decline in FDI projects in 2024, which EY said was largely due a drought of funds from the US, which declined by 11% for continental Europe and by 7% for the UK.
The lack of overseas funding underscores the government’s efforts to boost investment from domestic pension funds.
Earlier this week the bosses of 17 of the UK’s biggest pension funds struck a deal with the government to release up to £50bn worth of investments, with at least half earmarked for British assets including clean energy projects and homegrown startups.
EY said there was better news from Greater London, which remained the leading European region for FDI for a second year in a row. The UK also grabbed top spot for technology investment – accounting for 20% of all European tech projects secured last year.
Peter Arnold, the firm’s UK chief economist, said the UK could bounce back this year.
“Global uncertainty makes it difficult to predict how investment numbers will change this year, but the UK does have some strong fundamentals that could set it apart.
“It now has a government with a large majority in place for the foreseeable future and can project a sense of regulatory and legislative stability. An emphasis on project quality over quantity expressed by policymakers in recent years also appears to be working, with the UK securing a higher number of projects that typically generate greater long-term value such as R&D and manufacturing.”
Walmart warns it will raise prices because of tariffs
US retailing giant Walmart is warning today that it will be forced to raise prices, to pass on the impact of Donald Trump’s tariffs to consumers.
According to CNN, Walmart CEO Doug McMillon will tell analysts on an earnings call today:
“We will do our best to keep our prices as low as possible but given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.”
This throws a spotlight on the face that tariffs are paid by importers, not exporters, despite Donald Trump’s claims to the contrary.
Walmart, which declines to issue guidance for operating income growth and earnings per share for the second quarter of the year, reported revenue growth of 2.5% in Q1, and 4.3% growth in operating income growth.
Donald Trump hits out at Apple over India expansion plans
Over in Qatar, Donald Trump has blasted Apple over its plan to move iPhone manufacturing from China to India, to avoid US tariffs on Chinese-made goods.
Speaking during his state visit to the Middle East, president Trump revealed he had “little problem with Tim Cook yesterday.”
Trump explained that he had told Cook about his concerns over Apple’s expansion in India, saying:
I don’t want you building in India. You can build in India if you want, to take care of India, because India is one of the highest tariff nations in the world. It’s very hard to sell into India.
Trump then revealed that India has “basically” offered the US a trade deal with no tariffs.
“I told Tim Cook we’re not interested in you building (Apple) in India, they can take care of themselves, you up your production here (US),” claimed Trump. He added that India was one of the highest tariff-imposing countries & has now made an offer to reduce tariffs significantly… pic.twitter.com/11p9okfjTg
— CNBC-TV18 (@CNBCTV18News) May 15, 2025
Apple has been aiming to import most of the iPhones it sells in the US from India by the end of next year, as it tries to protect itself from the US-China trade war.
National Grid relaxed about Trump tariffs
Jillian Ambrose
When National Grid unveiled plans for £60bn, five-year investment program on both sides of the Atlantic last year, they were simpler times for the FTSE 100 company.
Today, Donald Trump’s tariffs on imported goods have cast a shadow over the market where it plans to carry out major infrastructure investments, and in the UK high profile power outages at Heathrow and the London underground have raised questions over the resilience of its grids.
But John Pettigrew, the outgoing chief executive of National Grid, is confident that the company will continue to deliver after revealing a better than expected 20% hike in pre-tax profits to £3.65bn for the last financial year.
He told the Guardian that 90% of its planned spending in the US relies on domestic goods and labour meaning the threat of import tariffs on key grid components is “pretty marginal” for the business.
He is also relatively sanguine about rising concerts over the UK power system’s resilience which, he points out, has improved by 50% over the last ten years, according to official measures of unplanned outages.
He says:
“As we think about society becoming more reliant on electricity, resilience will become more important. And we have spent a lot of time – particularly when we were owners of the energy system operator – thinking about grid stabilising technologies.
But as you’ve heard me say many times before, the UK is world-leading in grid stability.”
Pettigrew will step down from the helm of National Grid in November after almost a decade in the role, and 35 years at the company. He will be succeeded by Zoë Yujnovich, who until recently was a member of Shell’s executive committee and the oil company’s director for integrated gas and upstream.
Julia Kollewe
Car insurance premiums are coming down, after a turbulent couple of years during which many drivers were hit with record premium hikes and some saw their costs double.
The insurer Aviva said its motor prices for new customers fell by 4% between January and March, similar to the rest of the industry. Home insurance prices have been held flat, while other insurers have cut their rates. Claims inflation is running at mid to single digits levels across all areas.
Lower speed limits in Wales and parts of England have led to fewer motor claims. However, there is a limit to further price cuts as the cost of claims is still significant – there are more cars on the road and the cost of repairing cars is going up as the incorporate more technology.
Aviva is confident that its £3.7bn deal to buy smaller rival Direct Line will be wrapped up this summer, despite the UK’s competition watchdog launching an inquiry into the deal yesterday. Put together, Aviva and Direct Line would control 20% of the motor insurance market, similar to market leader Admiral.
Aviva’s chief executive Amanda Blanc said:
“The acquisition of Direct Line is firmly on track. Direct Line shareholders voted overwhelmingly in favour of the transaction and we expect to complete the deal in the middle of the year.”
Aviva, which operates in the UK, Ireland and Canada, reported a 9% rise in general insurance premiums to £2.9bn in the first quarter. Just over a year ago, it returned to the Lloyd’s insurance market when it bought the insurance platform Probitas.
Aviva’s wealth arm posted net flows of £2.3bn, down from £2.7bn a year earlier, because a large workplace scheme switched to another provider. At the end of April, net flows had risen to £4bn, equivalent to 6% of assets under management.
Storm Éowyn, which hit Ireland in January, has cost the industry €300m. Aviva’s market share is 10%, implying €30m of claims, according to Jefferies analyst Philip Kett.
Aviva is among the UK’s biggest pension providers that signed a voluntary commitment on Tuesday to invest at least 5% of their assets in the UK.
Chancellor of the Exchequer Rachel Reeves told Bloomberg Television in an interview that she didn’t rule out mandating pension funds to allocate money to UK assets, as the government seeks to channel more investment into the domestic economy. However, Blanc does not believe that pension funds should be forced to invest in Britain.
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.
