Business investment in the United Kingdom increased by 5.9% in the first quarter of 2025, marking the fastest growth rate in two years and relieving the Conerns that recent payroll increases would stop the expenditure of the private sector.
According to the Office of National Statistics (USA), the strong increase in investment from January to March helped to raise general economic growth to 0.7% in the quarter, with a commercial expense only contributing to 0.5 percentage points. The rebound follows a 1.9% contraction in the last quarter of 2024 and marks the strongest investment figures since the beginning of 2023.
The unexpected increase also helped compensate for a fall in government spending, promoted by a lower expenditure from the public sector in health and education in the period prior to the revision of the departmental budget next month.
The data occurs after generalized warnings of large employers and commercial groups that increase in the contributions of the National Employers Insurance and the National Vital Salary, both implemented on April 1, could the commercial feeling and lead to cuts. Several retailers had pointed out possible personnel reductions.
However, the ONS revealed that a large part of the investment growth was driven by spending in the transport and aircraft sectors, probably influenced by the purchases of the frontal load of the companies in the midst of uncertainty over US tariffs. There was also a robust growth in technology and information machinery, which reflects greater internal demand.
Simon Wells, European Chief Economist of HSBC, described the figures as “Barnstorming”, but warned that they cannot be sustained.
“Global uncertainty could weigh on investment spending. The second quarter can see a commercial hangover if companies advanced the activity, and the impact of public service invoices and the highest payroll taxes may still arise.”
It is likely that the figures are welcome by the Labor Government, which has made the promotion of private sector investment a central table or its economic strategy. Since the United Kingdom from the EU in 2020, business investment has constantly delayed other G7 economies.
Gabriella Dickens, an economist at the Ax Investment Managers G7, said the numbers suggested “genuine underlying impulse” in the economy.
“Despite uncertainty, companies advanced with investment projects, which is encouraging for future growth.”
The government expects the investment to be solid after its recent partial commercial agreement with the US, which eliminated tariffs on steel and aluminum exports in the United Kingdom and the import tasks of cars limited to 10%.
Additional progress can be on the horizon, since Prime Minister Sir Keir Starmer prepares to meet EU leaders in London next week, which increases the hope of closest economic cooperation and potential progress in the commercial relations of the United Kingdom-EU.
Meanwhile, the British trade chambers requested a “commercial restart”, urging the ministers to prioritize the reduction of bureaucracy for food and plants exports, agree on a youth mobility scheme and expand access to the work visa for the citizens of the United Kingdom and the EU.
The Government will now be observing the second quarter data to determine whether this increase in the late year is the beginning of a long -term trend, or a temporary impulse fed by external factors and preventive expenses.
Jamie Young
Jamie is a senior reporter of Business Matters, who brings more than a decade of experience in commercial reports of the United Kingdom. Jamie has a business administration title and participates regularly in conferences and industry workshops. When he does not inform about the last business development, Jamie is passionate about the mentoring of promising journalists and businessmen to inspire the next generation of business leaders.
