Reeves: UK Economy is Beginning to Turn Corner

The UK economy is “beginning to turn a corner”, the chancellor has said, after it grew by more than expected in the first three months of the year. Rachel Reeves told the BBC the 0.7% growth in the January-to-March period was “very encouraging”, but shadow chancellor Mel Stride said it was “a bit premature to be popping the champagne corks”.

The growth figure was stronger than the 0.6% that had been forecast, and was helped by increases in consumer spending and business investment.

The figures mark the period just before the US imposed import tariffs and UK employer taxes increased in April, and analysts warned the strong rate of growth was unlikely to continue.

The Labour government made boosting the economy its top priority when it came to power last year, but its decision to increase employers’ National Insurance (NI) contributions was criticised by many businesses who said it could hit growth.

The US import tariffs are also expected to hit growth, with the International Monetary Fund recently downgrading its forecasts for the global economy and UK.

But Reeves told the BBC: “We are set to be the fastest growing economy in the G7 in the first three months of this year. “We still have more to do,” she added. “I absolutely understand that the cost of living crisis is still real for many families, but the numbers today do show that the economy is beginning to turn a corner.”

Mel Stride criticised the rise in employers’ NI payments, calling it a “jobs tax”.

“Labour inherited the fastest-growing economy in the G7, but their decisions have put that progress at risk,” he said.

Liberal Democrat Treasury spokesperson Daisy Cooper said the data was “positive news”, but there was “no time for complacency”.

Reform UK deputy leader Richard Tice MP said: “We are yet to see the impact of Rachel Reeves’ April tax rises on growth, it won’t be pretty.”

The Office for National Statistics (ONS) said the UK’s dominant services sector – which covers businesses in sectors such as retail, hospitality and finance – was the biggest driver of growth in the first three months of the year.

But analysts warned growth was expected to slow in the months ahead, with Paul Dales at Capital Economics saying the latest figures “might be as good as it gets for the year”.

He said the strong rise in GDP was “unlikely to be repeated as a lot of it was due to activity being brought forward ahead of US tariffs and the rise in domestic businesses taxes”. Mr Dales noted that export volumes in the first three months of the year increased by 3.5%, following three consecutive quarterly declines.

But Liz Martins, senior UK economist at HSBC, told the BBC’s Today programme she was “quite cheered” by the figures.

“Business investment is up nearly 6% on the quarter and the service sector is doing well as well. So it’s not just manufacturers selling to the US to get ahead of the tariffs.”