On May 15, 2025, the Office for National Statistics (ONS) reported that the UK economy grew by a surprisingly robust 0.7% in the first quarter of the year, surpassing City economists’ predictions of a 0.6% rise. This figure, the strongest in a year, has been heralded by Chancellor Rachel Reeves as evidence that the Labour government’s economic plan is working, with claims that the UK is outpacing major economies like the US, Canada, France, Italy, and Germany. However, while the headline number may look impressive, Reeves’ attempt to claim credit for this growth is not only premature but arguably disingenuous, given the underlying factors driving the figures—factors that have little to do with her policies and much to do with pre-emptive economic activity before her tax rises and Donald Trump’s tariffs took effect.
A Closer Look at the Numbers
The 0.7% GDP growth in Q1 2025, driven largely by a buoyant services sector, paints a picture of an economy defying expectations. Export volumes surged by 3.5%, reversing three consecutive quarters of decline, and international trade added 0.4 percentage points to growth. Consumer spending and business confidence also appeared resilient, despite earlier warnings from business leaders about the impact of Labour’s fiscal policies. On the surface, this suggests a robust economic rebound, and Reeves has been quick to seize the narrative, proclaiming that “the government’s plan is working.”
However, the reality is far less flattering. The growth figures reflect economic activity from January to March 2025, a period before the full impact of Labour’s £40 billion tax rises—primarily a £25 billion increase in employer National Insurance contributions (NICs)—began to bite in April. These tax hikes, announced in the October 2024 budget, were widely criticised by business groups like the Confederation of British Industry (CBI), which warned of a “steep” decline in activity in Q1 2025 due to increased costs for employers. The ONS data, therefore, captures a snapshot of an economy operating under the pre-tax-rise status quo, not one shaped by Reeves’ fiscal strategy.
The Trump Tariff Effect
Another critical factor inflating the GDP figures is the pre-emptive expenditure driven by anticipation of Donald Trump’s sweeping tariffs, which began to take effect in early April 2025. Economists, including Paul Dales of Capital Economics, have noted that much of the growth can be attributed to businesses “pulling forward activity” to get ahead of these trade barriers. The US, a major trading partner for the UK, imposed tariffs as high as 25% on non-USMCA compliant goods from Canada and Mexico, with a baseline 10% tariff on other countries, including the UK, and higher reciprocal tariffs for some nations. UK businesses, anticipating disruptions, ramped up exports and stockpiled goods, contributing to the 3.5% surge in export volumes.
This “tariff frontrunning” mirrors patterns seen in the US, where companies built up inventories to beat higher import costs, temporarily boosting economic activity. However, this is a one-off effect, not a sustainable driver of growth. As Dales warned, the increase is “completely at odds” with the plunge in business confidence triggered by both the NIC hikes and tariff concerns, suggesting that the economy may weaken in the coming months as these headwinds materialise. Reeves’ failure to acknowledge this context in her celebratory rhetoric is a glaring omission.
Why Reeves’ Claims Are Misleading
Reeves’ attempt to frame the GDP figures as a vindication of Labour’s economic stewardship is problematic for several reasons. First, the growth occurred before her signature tax policies took effect, meaning they cannot be credited for the uptick. The £25 billion NIC increase, which began in April 2025, is already showing signs of straining businesses, with reports of reduced hiring and downward pressure on wage growth. Unemployment has jumped, and private sector firms are forecasting cuts in output and price hikes in response to higher costs. These are the early consequences of Reeves’ policies, not the drivers of the Q1 growth she is touting.
Second, the tariff-driven export surge is a temporary phenomenon, not a structural improvement in the UK economy. The global trade environment is deteriorating, with Trump’s tariffs projected to reduce US GDP by 0.6% to 8% in the long run and disrupt global supply chains. The UK, heavily reliant on exports to the US, faces a “double-edged sword” of rising domestic costs from tax rises and growing uncertainty over international trade. Reeves’ claim that the UK is outperforming major economies ignores the fact that the US economy contracted by 0.3% in Q1 2025, largely due to tariff-related import surges, a dynamic that artificially boosted UK exports in the same period.
Finally, the broader economic context undermines Reeves’ optimistic narrative. Real GDP per head fell by 0.2% in Q3 2024 and was 0.2% lower than a year earlier, signalling stagnant living standards. Food banks are at record highs, real wages remain under pressure, and public services are struggling amid rising national debt. Posts on X reflect public scepticism, with users accusing Reeves of “polishing a turd” and pointing to the “upside skew” in the data due to front-running of tax hikes and tariffs.
The Road Ahead: A Sobering Outlook
Economists are near-unanimous in predicting that the Q1 2025 growth will mark a high point for the year. The International Monetary Fund (IMF) forecasts UK growth of 1.4% for 2025, close to the Office for Budget Responsibility’s 1% estimate, but this assumes no further escalation in global trade tensions. The CBI’s warning of a “steep” decline in activity, coupled with the Resolution Foundation’s assessment that higher tariffs and economic uncertainty will sap momentum, suggests a challenging road ahead.
Reeves’ insistence on claiming credit for growth driven by pre-policy conditions and temporary trade dynamics is not just misleading—it risks eroding public trust. Rather than celebrating a fleeting uptick, the Chancellor should be upfront about the looming challenges: rising unemployment, strained businesses, and a global trade war that could derail the UK’s fragile recovery. Her focus on “fixing the foundations” and “sustainable long-term growth” rings hollow when the immediate outlook is so precarious.
Conclusion
The 0.7% GDP growth in Q1 2025 is a welcome surprise, but it is not a testament to Rachel Reeves’ economic leadership. The figures reflect activity before her tax rises took effect and are inflated by businesses scrambling to outpace Trump’s tariffs. By claiming credit, Reeves is not only misrepresenting the drivers of this growth but also glossing over the storm clouds gathering on the economic horizon. The UK public deserves candour, not spin, about the challenges ahead. As the effects of higher taxes and global trade disruptions begin to bite, Reeves may find that today’s victory lap is a fleeting moment in an increasingly turbulent economic saga.
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