The UK’s latest GDP figures have provided a rare moment of optimism in an otherwise challenging economic backdrop.
February’s 0.5% growth announced by the ONS has surprised on the upside, exceeding consensus expectations which had been for the figure to be around 0.1% and revising January’s numbers from contraction to stagnation.
But beneath the surface, the mood among investment leaders remains cautious. With structural weaknesses at home and growing geopolitical instability—most notably the resurgence of US trade protectionism under President Trump—wealth managers face a complex macroeconomic landscape. The UK is subject to Trump’s 10% blanket tariff for imports into the US. Of course, for China, the situation is different as their goods now attract US tariffs at 145%.
The prospect of rate cuts from the Bank of England offers some hope, yet the fragility of both global trade dynamics and domestic confidence raises important questions about how sustainable this rebound truly is. Here’s what leading investment experts are saying.
Paul Freedman, Investment Strategist at Omnis Investment said: “Today’s UK GDP release (Feb, MoM) is a welcome development and it exceeds the +0.1% consensus estimate and it improves upon January’s -0.1%. That said, the UK has both structural weaknesses including uncompetitive labour productivity, high energy costs and elevated interest rates and these factors contributed to the OBR downgrading the UK’s expected growth from 2% to 1% for 2025. This, combined with the likely negative effects of Trump’s tariff policies on UK economic activity means we think it more likely than not that the Bank of England will cut base rates three times by the end of 2025.“
Marcus Brookes, chief investment officer at Quilter Investors said: “Following a bleak reading in January, the UK’s latest GDP figures for February show a sign of an improvement in the economy. For the month, the economy saw growth of 0.5%, with growth over the last three months an equally better than expected 0.6%. Furthermore, January has actually been revised up from negative growth to no growth in the month.
“The problem facing the UK, however, is that things are incredibly volatile in the world for what is a very fragile economy. President Trump may have ‘paused’ the reciprocal tariffs on other countries, but the new regime remains unchanged for the UK. If anything, the UK has lost a competitive edge having previously got off lightly in Trump’s announcement last week. This global economic uncertainty is going to do very little for consumer or business confidence in the UK and as such growth will continue to be lacklustre.
“This presents a conundrum for both the government and the Bank of England. Keir Starmer and Rachel Reeves have staked their government on producing economic growth, yet have found their hands tied by the situation the UK finds itself in. Today’s reading will be a welcome relief, but if it is to be sustained then more radical measures may be required, but market appetite for that is simply not there just now. That leaves the Bank of England being relied upon to deliver rate cuts in order to stimulate growth, but it will be wanting to act cautiously with fears Trump’s tariffs will raise inflation globally.
“The UK is in somewhat of a precarious position right now, caught in the crossfire of the constantly changing economic policy of the US. The government will need to think creatively and find some quick wins in order to sustain this positive reading and negate the economic impact tariffs will bring.”
Derrick Dunne, CEO of YOU Asset Management, comments on this morning’s ONS GDP figures said: “Never mind a week, a day is proving to be a very long time in global politics in Trump’s second term. The UK economy may have returned to growth, however an incredible amount has happened since the data was compiled.
“The fragile UK economy must now contend with the turmoil wrought by the new tariff regime in the US. The ninety-day reprieve of these hokey-cokey tariffs, while welcome, prolongs the uncertainty.
“The trade war isn’t the only problem. High energy costs and rising taxes are also likely to weigh on economic growth from here. It is tough to find reasons to be cheerful about the UK’s prospects at the moment, but we’ve yet to see what impact the government’s growth agenda will ultimately have.
“Nevertheless, there is some consolation that the UK is not an outlier. A lot of countries are feeling the pain from trade disruption, high borrowing costs and sticky inflation, including the US. All eyes will now be on the Bank of England meeting on 8 May and whether a rate cut offers some respite to the beleaguered UK economy.”
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said; “The economy grew much faster than expected in February. Some of this probably represents standard monthly volatility, but the strength is reasonably broad, and the data should provide some reassurance that growth was holding up before tariffs, national insurance, national living wage and the Spring Statement impacted.
However, tariff developments and the swings in market sentiment will likely dominate any backward looking data in terms of shaping the outlook for the economy and policy. We continue to expect another rate cut from the Bank of England in May despite the somewhat growth given the likely disinflationary shock from global trade developments.
Meanwhile, the volatility in gilt yields may further encourage an eventual shift in the fiscal rules, as the government tries to insulate from some of the externally-driven movement in financial conditions.”
Richard Flax, Chief Investment Officer at Moneyfarm said: “This unexpected upturn highlights the economy’s resilience amid global trade tensions, notably those stemming from U.S. tariff policies.
Despite this positive development, the broader economic outlook remains uncertain. the Bank of England’s recent decision to postpone a £600 million auction of long-term government bonds, citing market instability due to tariffs, underscores ongoing concerns. Markets had been anticipating a potential 25 basis point rate cut in May to bolster economic resilience against external shocks. On balance, for now, we’d expect to see that rate cut come through, even in the face of such macro uncertainty.
February’s strong GDP performance offers a hopeful sign for the UK’s economic trajectory. Nevertheless, the interplay of international trade dynamics and domestic economic indicators will be crucial in shaping future monetary policy decisions.”
