The UK economy delivered a welcome surprise in February, posting a 0.5% rise in GDP and hinting at a potential turnaround following a lacklustre start to the year. Revised data also shows January’s economic performance was stronger than initially thought, with growth over the past three months now estimated at 0.6%.
While the figures bring a momentary sense of relief, experts warn that global volatility — especially surrounding US tariffs, inflation fears, and fragile market sentiment — continues to cast a long shadow over the UK’s recovery prospects. Here’s what leading economists and investment strategists had to say about the numbers and what lies ahead.
Commenting on these latest data, Marcus Brookes, chief investment officer at Quilter Investors said: “Following a bleak reading in January, the UK’s latest GDP figures for February show a sign of an improvement in the economy. For the month, the economy saw growth of 0.5%, with growth over the last three months an equally better than expected 0.6%. Furthermore, January has actually been revised up from negative growth to no growth in the month.
“The problem facing the UK, however, is that things are incredibly volatile in the world for what is a very fragile economy. President Trump may have ‘paused’ the reciprocal tariffs on other countries, but the new regime remains unchanged for the UK. If anything, the UK has lost a competitive edge having previously got off lightly in Trump’s announcement last week. This global economic uncertainty is going to do very little for consumer or business confidence in the UK and as such growth will continue to be lacklustre.
“This presents a conundrum for both the government and the Bank of England. Keir Starmer and Rachel Reeves have staked their government on producing economic growth, yet have found their hands tied by the situation the UK finds itself in. Today’s reading will be a welcome relief, but if it is to be sustained then more radical measures may be required, but market appetite for that is simply not there just now. That leaves the Bank of England being relied upon to deliver rate cuts in order to stimulate growth, but it will be wanting to act cautiously with fears Trump’s tariffs will raise inflation globally.
“The UK is in somewhat of a precarious position right now, caught in the crossfire of the constantly changing economic policy of the US. The government will need to think creatively and find some quick wins in order to sustain this positive reading and negate the economic impact tariffs will bring.”
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said; “The economy grew much faster than expected in February. Some of this probably represents standard monthly volatility, but the strength is reasonably broad, and the data should provide some reassurance that growth was holding up before tariffs, national insurance, national living wage and the Spring Statement impacted.
However, tariff developments and the swings in market sentiment will likely dominate any backward looking data in terms of shaping the outlook for the economy and policy. We continue to expect another rate cut from the Bank of England in May despite the somewhat growth given the likely disinflationary shock from global trade developments.
Meanwhile, the volatility in gilt yields may further encourage an eventual shift in the fiscal rules, as the government tries to insulate from some of the externally-driven movement in financial conditions.”
Scott Gardner, investment strategist at J.P. Morgan owned digital wealth manager, Nutmeg, said: “The shock and awe of the past few days will overshadow these latest UK GDP figures but a sizeable return to growth during February for the UK economy marks a positive end to the week.
“Driving this expansion in the economy, we saw a back-to-back monthly jump in retail sales volumes as consumer confidence levels also marginally increased during February. On the other side of the coin, manufacturing PMIs remained at a low level with output and new orders remaining in contraction territory.
“Looking ahead, while the UK economy is forecasted to grow in 2025, it is hard to view these figures in isolation after this week’s events. The recent tariff announcements provide some uncertainty for the economy and will impact the trading environment for businesses throughout the rest of the year. That said, as the UK is a leading global exporter of services, the economy appears to be in a relatively better position than Europe which is more exposed to the dynamics of global goods trading. In our view, a rebound in housing market activity, buoyed by falling interest rates, remains pivotal to delivering a sustained uptick in growth.”
Richard Pike, chief sales and marketing officer at Phoebus Software says: “News that GDP is estimated to have grown by 0.5% in February 2025, with growths in all main sectors, is a welcome surprise given the headwinds the UK economy has been facing. With independent forecasts for 2025 GDP growth hovering around just 1.1%, and many analysts revising their predictions downward due to rising business taxes and softer global demand, this is an unexpected but positive development.
“The resilience is particularly striking in the context of recent global pressures, not least the new US tariffs, which prompted KPMG and others to downgrade their UK growth forecasts. Although Trump announced on Wednesday a 90-day pause to the tariffs, which will provide some respite, the ongoing uncertainty and turbulence is unsettling for the market. While it’s too early to tell whether this growth marks the start of a more sustained recovery, it will certainly be interesting to see how this data impacts the Bank of England’s next interest rate decision.”
Derrick Dunne, CEO of YOU Asset Management, comments on this morning’s ONS GDP figures saying: “Never mind a week, a day is proving to be a very long time in global politics in Trump’s second term. The UK economy may have returned to growth, however an incredible amount has happened since the data was compiled.
“The fragile UK economy must now contend with the turmoil wrought by the new tariff regime in the US. The ninety-day reprieve of these hokey-cokey tariffs, while welcome, prolongs the uncertainty.
“The trade war isn’t the only problem. High energy costs and rising taxes are also likely to weigh on economic growth from here. It is tough to find reasons to be cheerful about the UK’s prospects at the moment, but we’ve yet to see what impact the government’s growth agenda will ultimately have.
“Nevertheless, there is some consolation that the UK is not an outlier. A lot of countries are feeling the pain from trade disruption, high borrowing costs and sticky inflation, including the US. All eyes will now be on the Bank of England meeting on 8 May and whether a rate cut offers some respite to the beleaguered UK economy.”
