UK GDP: Surprise growth spurt 'calm before tariff-induced storm' as gold hits record high

A surprise rebound in the UK economy is likely to be the calm before a tariff-induced storm, analysts have warned.

Official data showed that gross domestic product (GDP) - a measure of economic output - grew by 0.5 per cent in February, surprising economists who had pencilled in a figure closer to 0.1 per cent. It also marks a significant monthly improvement after no growth in January, the Office for National Statistics (ONS) noted, after revising its previous estimate of a 0.1 per cent fall for the month.

While the figures will come as a welcome boost for Chancellor Rachel Reeves, who has made economic growth her top priority, they also predate the current upheaval caused by US president Donald Trump’s tariff announcements. The positive GDP data provided some support for the embattled FTSE 100 index, which has had a rollercoaster ride of late.

Factories showed a particular turnaround in activity in the latest GDP data.

Luke Bartholomew, deputy chief economist at Scottish funds firm 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 growth, given the likely disinflationary shock from global trade developments.”

Nicholas Hyett, investment manager at Wealth Club, said: “GDP data often feels a bit dated by the time it’s published - the Trump shaped asteroid that hit markets in the last week means February’s data feels practically pre-historic. Nonetheless the picture it paints is a rosy one, as output grew across all three major sectors.”

ONS director of economic statistics Liz McKeown said the economy grew “strongly” in February, pointing to more activity across the services and manufacturing industries. Factories showed a particular turnaround in activity, with production output growing 1.5 per cent in the month after a fall of 0.5 per cent in January.

The construction industry grew by 0.4 per cent, from a 0.3 per cent fall the previous month, while the crucial services sector - more than two-thirds of the economy - grew by 0.3 per cent in February, up from 0.1 per cent in January.

William Bain, head of trade policy at the British Chambers of Commerce, said that with the effects of new US tariffs still reverberating around the world, UK firms would need “resilience and agility to respond”.

Meanwhile, this week’s market volatility has seen gold - always viewed as a safe haven - soar to new record highs. The precious metal surpassed $3,200 per ounce on Friday morning - its highest ever price.

Bas Kooijman, chief executive and asset manager at DHF Capital, noted: “The metal rose as the US and China continue to raise their tariffs, deepening fears of a prolonged global trade confrontation. Geopolitical risks also remain a key driver of gold’s momentum. With tensions continuing in Eastern Europe and the Middle East, safe-haven demand could remain high.”

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