The UK economic system recorded stronger-than-expected development of 0.5% in February, providing a great addition to enterprise confidence and easing quick fears that President Trump’s world tariff coverage would constrain British output.
Figures launched on Friday by the Workplace for Nationwide Statistics (ONS) confirmed broad-based growth throughout companies, manufacturing and building. The outcome far outpaced economists’ forecasts of 0.1% development, and adopted a revised estimate of 0.0% development in January (initially reported as a 0.1% contraction).
The rebound comes as a shock to many analysts, given the heightened uncertainty triggered by Trump’s protectionist commerce measures — together with a ten% import tariff on UK items, which stays in place regardless of a current 90-day pause on steeper fees.
“The economy grew strongly in February with widespread growth across both services and manufacturing industries,” stated Liz McKeown, ONS director of financial statistics.
The companies sector — which accounts for round 80% of UK financial exercise — grew 0.3%, supported by sturdy efficiency in pc programming, telecoms and automobile dealerships. In the meantime, manufacturing output rose by 1.5%, with electronics, prescribed drugs, and automobile manufacturing all exhibiting sturdy positive factors. Building output elevated by 0.4%.
Chancellor Rachel Reeves welcomed the figures as an “encouraging sign” that the economic system is recovering, however cautioned that “there is no room for complacency”.
Throughout the three months to February, the UK economic system additionally grew steadily, with the ONS noting a constant uptick in companies output.
Nevertheless, longer-term financial dangers stay in focus. UK authorities bond yields have surged to their highest degree since 1998, pushed by turmoil within the US sovereign debt market. If yields stay elevated, they might erode the chancellor’s estimated £9.9 billion in fiscal headroom, limiting choices for future tax or spending interventions.
Trump’s tariffs — which now embody a 125% levy on Chinese language imports — proceed to forged a shadow over the worldwide commerce outlook. Whereas the UK has prevented the steepest duties, economists warn that any escalation might weaken exterior demand and squeeze provide chains.
On the similar time, rising UK inflation could complicate the financial coverage outlook. The inflation fee is predicted to rise from 2.8% to three.75% by the summer time, doubtlessly limiting the Financial institution of England’s scope to chop rates of interest, at the moment at 4.5%.
Markets had priced in a doable fee lower as early as subsequent month, notably if Trump’s tariffs had a sharper-than-expected impact on development. Nevertheless, February’s stronger GDP print could delay any quick coverage shift from Threadneedle Road.
For now, companies and buyers will take coronary heart from the info — however many will proceed to maintain a detailed eye on worldwide developments and home inflation within the months forward.
