UK economic growth confirmed at 0.7% in first quarter as household saving ratio falls – business live

UK-US trade deal kicks in today, lowering tariffs for British carmakers and aerospace sector

Matt Swannell, chief economic advisor to the EY Item Club forecasting group, said while the GDP figures confirm a strong start to 2025, “this pace of growth appears temporary”.

There appear to be problems with residual seasonality in the data which is making the early part of the year look artificially strong. Q1 was also boosted by a strong increase in aircraft investment, which is likely to unwind, and some business appears to have been brought forward to beat changes in US trade policy. The early signs are that the UK looks set for much softer growth in the second quarter of 2025, with output already having fallen in April.

A feature of the last year was that households preferred to save rather than spend a lot of their real income gains. A saving ratio of 10.9% in Q1 was far higher than usual, although it was a fall of 1.1ppt from Q4. With earnings growth slowing and inflation set to rise, growth in real income looks set to slow across the rest of this year, but with scope for households to save a little less, there is space for consumption to be cushioned from this slowdown.