UK GDP: surprise boost as economy grew 0.5% in February

The UK economy grew in February, to the surprise of most forecasters, with manufacturing providing the backbone of UK GDP growth.

UK GDP rose by 0.5% on a monthly basis, according to the latest figures from the Office for National Statistics (ONS). Analysts had forecast a growth rate of 0.1%.

“These growth figures are an encouraging sign, but we are not complacent,” said Rachel Reeves, chancellor of the exchequer, in response to the news. “The world has changed, and we have witnessed that change in recent weeks.”

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The positive figure is a welcome reversal from January, which had initially shown a 0.1% contraction – though the ONS has revised this to no growth in the latest release.

There is, though, a large caveat hanging over the data in the form of Trump’s tariff trade war.

Despite a temporary pause on higher tariffs for most countries, announced 9 April, the US’s baseline 10% rate continues to apply on goods imported from the UK, and trade barriers between the US and China are rising fast. None of that is good news for the UK’s highly globalised economy.

“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,” says Scott Gardner, investment strategist at J.P. Morgan-owned Nutmeg.

What drove the rise in UK GDP in February?

One highly positive aspect of the report is that GDP grew in all three of the main sectors of the economy (services, production and construction).

Services grew 0.3% in February, while construction – which had fallen 0.3% in January – grew 0.4%.

The production sector, however, saw by far the fastest growth of 1.5%, following a 0.5% fall the previous month. In the three months to February 2025, production grew by 0.7%.

Manufacturing was the key driver of growth in the production sector. Within manufacturing, electronics and pharmaceuticals made the biggest contributions to growth (0.66% and 0.43% respectively), with transport manufacturing also picking up despite struggling over the preceding three months.

How will Trump tariffs affect UK GDP growth?

It’s certainly positive news that the UK economy showed strength in February. That in itself reduces the likelihood of a UK recession during the first half of the year.

The trouble is, February was, in economic terms, a long time ago. Donald Trump’s announcement of sweeping tariffs, including a 10% baseline rate for imports from the UK, sent markets into turmoil when they were announced on 2 April (‘Liberation Day’, in Trump’s parlance).

“GDP data often feels a bit dated by the time it's published – the Trump-shaped asteroid that hit markets in the last week means February's data feels practically pre-historic,” says Nicholas Hyett, investment manager at Wealth Club.

While a bond market crash forced the US president to instigate a 90-day pause on most higher-rate ‘reciprocal’ tariffs on imports from other countries (including 20% for the EU, 24% for Japan and 32% for Taiwan), UK goods imported to the US will still be subject to a 10% tariff, which could hurt the country’s exporters.

Additionally, tariffs between the US and China have been ramped up still further. This could hurt both economies, and potentially cause a global GDP slowdown in the process. The UK, whose economy is skewed towards globally-connected sectors like finance, industrials and energy, could be hurt by a decline in trade, even if tariffs on its own exports are not at elevated levels.

“Donald Trump has upended the global trade system. That could have caused UK economic growth to go extinct – making today's numbers a fossilised window into a lost world,” says Hyett.

There is also reason to believe that the apparent strength of the manufacturing sector could be a short-lived phenomenon, resulting from anticipation of the upcoming tariff announcement.

“The bounce in manufacturing output may be short-lived,” says Sanjay Raja, chief UK economist at Deutsche Bank. “Judging from the industries that saw the biggest pickup in February (textiles, clothing, wood, pharmaceuticals, metals, electrical manufacturing, autos, and machinery), we think there are clear signs that there may be some inventory build-up in the run-up to the April tariff announcement.”

Will the UK economy keep growing?

There are other headwinds facing UK GDP growth besides Trump’s tariff turmoil.

Higher living wages and increased employers’ National Insurance contributions, announced in Rachel Reeves’ Autumn Budget, kicked in this month, and these could weigh on the growth of UK businesses.

However, the April data at least suggests that the UK economy is heading into these adjustments and the global trade upheaval from a position of relative strength.

“Overall growth of 0.5% in a month is genuinely impressive, far faster than either the market or we had expected, and in the absence of disruption would have been a sign the UK economy was evolving nicely,” says Hyett.

Deutsche Bank’s indicators suggest UK GDP growth of close to 0.65% during the first quarter of 2025.

“But beware the path ahead,” says Raja. “If we are right, a correction in inventories would pull down on Q2-25 GDP. Equally, the onset of tariffs from April will also start to bite UK industries alongside the rise in trade uncertainty.”