The UK economy will grow faster than previously thought after a stronger-than-expected start to the year, according to forecasters at EY – although some of the faster growth might have come from companies bracing for Donald Trump’s tariffs.
The EY Item Club, which tries to mimic government modelling, has upgraded its forecast for UK GDP growth in 2025 from 0.8% to 1%.
It said that came from a “significant increase in business investment, which rose by 3.9% in Q1”.
However, this is thought to partly reflect the acceleration of business investment and purchase decisions by some companies in March, ahead of the implementation of US tariffs in April.
That increase in business investment may not be sustainable in the second half of 2025, the forecasters said – and they do not expect any growth in business investment during 2026.
Anna Anthony, a regional managing partner at EY,said:
After a strong start to the year, uncertainty in the global economy and international trade policy has continued to slow momentum. While the agreement struck with the US offers welcome relief to certain sectors and boosts the trading outlook, the UK’s access to a key export market is still reduced from where it was at the start of 2025, which is likely to weigh on growth.
Business investment is expected to remain modest until 2027 and while interest rate cuts should reduce debt service costs and make financing cheaper, this will take time to materialise. Until then, businesses face a period of international uncertainty, alongside elevated labour and energy costs.
