UK GDP Up Unexpected 0.7% but Will That Stop Interest Rate Cuts?

Gross Domestic Product (GDP) in the UK grew by 0.2% in March 2025 and by an unexpected 0.7% January, February and March, higher than the forecast 0.5%.

This made the UK economy the fastest growing in the G7 for the first quarter but does this mean further interest rate cuts by the Bank of England may be delayed?

Make no mistake, this growth was all before:

• Huge increases to Employers National Insurance Contributions (NIC) that started in April.
• Huge national living and minimum wage increases have increased pay roll costs for most employers.
• Stamp duty concessions on property purchases being withdrawn for most of us in April.
• Donald Trump’s US import tariffs (and suspension).
• UK/India trade deal.
• UK/US tariff reduction agreement.

Comment

The return to ‘normal’ non-concessionary stamp duty rates created a stampede in March to get property sales through before April, creating an artifical boost for the economy.

Elsewhere, we are seeing many larger firms cut back on staff recruitment and indeed there have been and will be more redundancies due to employer NIC increases that started in April.  Unemployment for January to March was up to 4.5%, an increase of 100,000 compared to the same period in 2024.  More unemployment pain is to follow.

Do not forget most of the US’s tariffs have only been suspended for 90 days, they may still come back to hit the global economy and the Fed held interest rates this month at a range of 4.25% to 4.50% pa.

We suggest this is close, we expect a slowdown in GDP despite no doubt, the Labour government will be claiming success, but we do fear for recession still and suggest a likelihood that the Bank of England will freeze interest rates at the next Monetary Policy Committee meeting on 19^th June 2025, but will then likely reduce base rates again from 4.25% to 4.0% pa in the summer.