UK (Parliament Politics Magazine) – UK GDP grew fastest in the G7, yet households faced a 1% drop in real income and declining savings, signalling ongoing pressure from rising costs.
As reported by The Guardian, official data shows that in the first quarter of 2025, British households felt intensified economic pressure due to rising taxes and inflation, despite leading the G7 in growth.
What did ONS data reveal about the UK’s economic strain?
The Office for National Statistics reported that real household disposable income per person dropped by 1% in the first quarter of 2025 – the first decline in nearly two years, after a 1.8% increase at the end of 2024.
The regulator reported a 1.1-point decline in the household saving ratio, bringing it to 10.9% – a notable drop, yet still above the long-term average.
Despite leading the G7 with 0.7% growth in Q1, the UK shows signs of renewed pressure on living standards, according to official data.
According to the ONS, the decline in Q1 was largely driven by increasing inflation and higher income taxes. Despite a £5.9bn rise in wages, a £4.4bn tax burden reduced overall income gains.
What did Liz McKeown say about the drop in the UK saving ratio?
Liz McKeown, the ONS director of economic statistics, said,
“The saving ratio fell for the first time in two years this quarter, as rising costs for items such as fuel, rent and restaurant meals contributed to higher spending, although it remains relatively strong.”
She added,
“While overall quarterly growth was unrevised, our updated set of figures shows the economy still grew strongly in February, with growth now coming in a little higher in March too.
There was broad-based growth across services, while manufacturing also had a strong quarter.
What did the growth figures mean for Keir Starmer’s promises?
Government officials pointed to the Q1 growth estimate as early proof that Labour’s financial policies were taking effect, following a turbulent start in office. The in-depth findings underline ongoing financial strain on households, raising concerns over whether Keir Starmer can deliver on his promise of shared economic gains.
One of Keir Starmer’s six declared priorities is to raise household disposable income before the current term ends. He argued the benchmarks would let voters measure performance and demand results.
How did trade tensions and tariff fears shape UK exports?
The independent financial watchdog, OBR, projects that the economy will grow by 1% in 2025, with a fresh assessment expected before Rachel Reeves’s autumn budget.
Exporters accelerated sales to the US from January to March, preparing for the impact of Donald Trump’s planned tariffs.
The UK’s new trade deal with the US, activated on Monday, aims to reduce the impact of significant tariffs. But Bank of England governor Andrew Bailey warns that ongoing uncertainty around trade policy continues to pose a risk to the nation’s economic future.
US-UK trade deal
- 25% steel/aluminium tariffs scrapped.
- Car tariffs cut from 27.5% to 10%.
- UK beef allowed into US; US farmers get UK access.
- No chlorinated chicken or hormone beef allowed.
- Preferential terms for UK pharma and aerospace.
- 10% base tariffs still apply; tech talks ongoing.