UK Economy Grows by 0.5% in February, Surpassing Expectations
People browsing stalls along Portobello Road Market on Feb. 22, 2025, in Notting Hill, West London.
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The U.K. economy grew by a higher-than-expected 0.5% month-on-month in February amid a jump in services output, official data showed on Friday.
Analysts had projected a monthly gross domestic product hike of 0.1% in February, according to LSEG data. The Office for National Statistics, which published the provisional figures, stated that a 0.3% expansion in the services sector had driven the surprising growth. In January, services recorded a 0.1% monthly rise.
Production output saw a substantial recovery in February, achieving 1.5% month-on-month growth compared to the 0.5% contraction observed in January. Construction output also rebounded in February, increasing by 0.4% on the month after experiencing a decline of 0.3% in January.
The British pound appreciated against the dollar following the data release, rising 0.6% to trade at $1.3047 by 8:08 a.m. in London.
In January, an early estimate indicated that the U.K. economy unexpectedly shrank by 0.1% on a monthly basis. That figure was later revised upward to show that economic growth was flat in January.
The U.K. economy has struggled to gain momentum over the past year. ONS data earlier this year revealed that Britain’s GDP expanded by 0.1% in the fourth quarter of the previous year, after remaining unchanged in the three months prior.
Friday’s figures are released as the U.K. prepares for the economic impact of new 10% tariffs on its exports to the United States. British lawmakers had hoped to avoid the full measures of the U.S. tariffs regime, as America accounted for 17% of Britain’s international trade in the year to September 2024 — making it the U.K.’s largest trading partner.
The potential reinstatement of suspended reciprocal tariffs this summer could impose additional 10% duties on British goods.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, mentioned that the uncertainty surrounding the tariffs is likely to overshadow Friday’s better-than-expected economic data when it comes to the Bank of England’s decision on whether to lower interest rates next month.
Markets are currently anticipating a 25-basis-point interest rate cut from the Bank of England in May, according to LSEG data, which would reduce the central bank’s core interest rate to 4.25%.
“Though activity rebounded strongly as services and manufacturing output increased, February’s figures are being overshadowed by the financial market turbulence caused by the tariff announcements,” Thiru said. “The heightened global financial and economic instability related to the U.S. tariffs makes a May rate cut more likely, fueling concerns among rate setters about the underlying resilience of the U.K. economy.”
Meanwhile, significant welfare spending cuts and a heavier tax burden on businesses have raised concerns about the economic outlook. Last month, the U.K.’s Office for Budget Responsibility reduced its growth forecast, lowering its outlook from 2% to 1% growth for 2025.
