Labour rides Q1 growth surge as UK tops G7 economies

Mace | 15th May 2025 | Politics
British,Chancellor,Of,The,Exchequer,Rachel,Reeves,Attends,In,A

The UK economy grew 0.7% in Q1 2025, the fastest among G7 nations, offering a political lift to the Labour government. The Bank of England upgraded its annual forecast but cut interest rates amid global uncertainty. Critics warn Labour’s tax strategy could dampen future growth despite the strong start.

The UK economy expanded by 0.7% in the first quarter of 2025, outpacing all other G7 nations and delivering a political boost to the Labour government. The growth, driven largely by the services sector, exceeded economists’ expectations of 0.6% and marked the strongest quarterly performance since early 2024. Treasury Chief Rachel Reeves attributed the uptick to Labour’s economic policies since taking office last July.

This acceleration places the UK ahead of its G7 counterparts, with Canada estimated at 0.4%, Italy at 0.3%, Germany at 0.2%, France at 0.1%, and the US contracting by 0.075%. Japan’s data is pending, but a slight contraction is anticipated.

The Bank of England responded by cutting interest rates to 4.25% on May 8, its fourth reduction in seven meetings. The move aims to support economic growth amid global uncertainties, including US tariffs. The Bank revised its 2025 growth forecast to 1% from 0.75%, reflecting better-than-expected Q1 performance. 

Despite the positive data, challenges remain. The OECD projects UK growth to slow to 1.3% in 2026 due to increased taxes and government borrowing potentially dampening private consumption and investment. Inflation is expected to average 2.7% in 2025, the highest in the G7.

Critics argue that Labour’s policies may hinder long-term growth. The Financial Times notes that Chancellor Reeves faced early warnings against …

Subscribe to The Mace

Join the member community shaping British politics and stay ahead of what's really happening in the world of politics and public affairs, with expert analysis, breaking news, and insider insights from Westminster and Brussels. The Mace is the leading news source and resource for the government affairs industry, offering required reading and lobby intelligence for professionals.

To see what you are missing out on by not subscribing to The Mace, click here to download our full membership info-pack. This includes having no paywall on op-ed content or profiles/interviews, allowing professional profiles to be read with maximum impact and visibility by government, special advisers, MPs, peers, civil servants, and policy and political decision-makers.



Silly season is coming to an end: What to expect from Westminster this Autumn

Lucy Carrier-Pilkington | August 27, 2026

September and October usually mark the most intense period of political activity in the UK, here is what to expect.

Andy Burnham’s social media strategy faces questions over traditional media

Mace Magazine | August 26, 2026

The former Downing Street communications chief believes “there are hard truths coming” for Burnham.

Industry Watch: John Gill, Deputy Director of External Affairs, Reform UK – “There’s no limit to where a man can go if he doesn’t mind who gets the credit”

Mace Magazine | August 20, 2026

John Gill's promotion at Reform UK, just before the party launches its inaugural Business Day at its September NEC conference, is indicative of how the party is ramping

Carry on, Clacton

William Cash | August 18, 2026

Wiliam Cash reflects on how the myth of Clacton and its reality has created media distortion when it comes to reporting on Farage’s seaside spiritual HQ.

The Clacton by-election: “It has been amazing for business” 

Ella Beadman and Lucy Carrier-Pilkington | August 10, 2026

Ahead of the Clacton-on-Sea by-election this Thursday, Mace went to the constituency to hear what local businesses make of the media circus that has descended on the seaside town, and the changes they want

Burnham is trying to fix Whitehall, but will the political machinery change?

Mace | August 7, 2026

Andy Burnham is shaking up government with more changes than by any incoming prime minister in memory. But, asks Sir Bernard Jenkin MP, does he understand why the

Racing the sunset: a pilgrim odyssey across a dying Europe

Mace | August 4, 2026

For 10 months, ex-army officer James Jeffrey trekked 3500 km across Europe by foot. The scale of migration he witnessed may not have been as dramatic as the

Leader in Public Affairs: Grace Pritchard, Downing Street Director of News and the Prime Minister’s Political Spokesperson

Mace | August 3, 2026

After heading the Makerfield by-election comms team, Grace Pritchard was singled out by Andy Burnham as being a key part of his northern campaign team. The self-styled 'Yorkshire

Dame Antonia’s key civil service reforms are ready to be supported by Whitehall, says Jonathan Freeman

Mace | August 1, 2026

The Civil Service is ready to support Dame Antonia Romeo's flagship changes to government machinery - notably relating to AI and devolution - under new prime minister Andy

Kemi’s true blue purge, with help from Sir Philip May

William Cash | July 26, 2026

The news that former Home Secretary Sir Grant Shapps has failed to make the new Tory candidate list has put fear into dozens of former Conservative MPs. Whether