UK Economy Outpaces Expectations in February, but US Tariffs Cast Shadow on Outlook

London: The UK economy delivered a stronger-than-expected performance in February, posting 0.5% growth, according to data released Friday by the Office for National Statistics (ONS). The uptick was primarily driven by robust activity in the services sector, with a particular boost from telecoms, computer programming, and car dealerships.

The positive surprise comes amid rising uncertainty, as the UK braces for the economic impact of newly imposed U.S. tariffs on a wide range of British goods. Analysts have cautioned that the momentum may be short-lived.

Exports Surge Ahead of U.S. Tariffs

In anticipation of the new tariffs, exports to the United States surged by £500 million, marking the third consecutive monthly increase. Goods shipments to the U.S. are now at their highest level since November 2022.

“There are clear signs that UK firms increased goods exports to the US ahead of the introduction of tariffs,” said William Bain, Head of Trade Policy at the British Chambers of Commerce (BCC). “Data over the past three months shows a 23% rise in goods flowing across the Atlantic.”

The tariffs include steel and aluminium duties effective March 12, with a 10% blanket levy on most other UK goods starting earlier this week.

Despite the current export spike, economists warn that higher trade barriers could limit growth in the months ahead.

Sector Highlights and Upward Revisions

In addition to the February numbers, the ONS revised January’s GDP estimate upward, from a 0.1% contraction to flat growth. This adjustment, combined with February’s performance, pushed the three-month rolling growth average to 0.6%, offering a glimmer of hope that recession fears may have been premature.

“The better-than-expected figures were supported by strong performances in the manufacturing, electronics, and pharmaceutical sectors, as well as a rebound in car production,” said Liz McKeown, Director of Economic Statistics at the ONS.

The rebound in car manufacturing followed months of underperformance and played a key role in lifting February’s output.

Government Reacts with Cautious Optimism

Chancellor Rachel Reeves described the latest economic data as an “encouraging sign,” but warned that structural challenges remain.

“We’re not complacent,” Reeves said. “We must go further and faster to kickstart economic growth, provide security for working people, and put more money in their pockets.”

She added that continued engagement with U.S. counterparts is essential to secure a more favorable trading environment for British exporters.

Mounting Domestic Pressures

However, domestic factors are also weighing on business sentiment. Rising taxes, National Insurance contributions, and increases in energy and water bills are expected to drag on consumer spending and business investment.

Mitchell Barnes, who runs a 3D printing firm in Warwickshire supplying the U.S. auto industry, said local economic policies are having a greater effect on his business than overseas tariffs.

“We’ve had to revise our hiring plans because of the National Insurance hike and minimum wage changes,” Barnes said. “We were planning to scale up to 100 staff. Now, we’re targeting 30 to 40.”

As a result, Barnes says his company will accelerate plans to expand operations in the United States, seeking stability amid volatile UK policy.

“Ultimately, for us, it's all about innovating in order to control our own destiny,” he added.

Warnings of Short-Lived Growth

Despite February’s gains, economists say growth may falter as external headwinds and internal policy constraints take hold.

“The UK's surprisingly strong growth will likely prove short-lived,” warned Ruth Gregory, Deputy Chief UK Economist. “Tariffs, tax rises, and energy bill increases are poised to slow down momentum.”

Gregory also noted that the UK economy has only grown in four of the last nine months, reflecting ongoing fragility.

Outlook Remains Mixed

While February’s performance may ease some recession concerns, the full-year outlook remains clouded. Global volatility, trade tensions, and inflationary pressures continue to pose significant risks.

Mel Stride, Shadow Chancellor, criticized the government’s handling of economic policy, saying Labour’s measures “have killed growth stone dead” and that “there is still a long way to go to recover.”

Nonetheless, some experts see a silver lining, suggesting the UK could position itself as a resilient, trade-friendly economy if it capitalizes on current uncertainty.