Chancellor Rachel Reeves has welcomed new figures indicating an unexpected rate of growth for the UK economy in February, but new recruitment data for March indicates a continued decline in activity.

The UK’s gross domestic product grew 0.5% month-on-month in February, following zero growth in January, revised up from a 0.1% fall.

Reeves acknowledged that the numbers predated President Trump’s various tariff announcements: “These growth figures are an encouraging sign, but we are not complacent. The world has changed and we have witnessed that change in recent weeks.

“This government will remain pragmatic and cool-headed as we seek to secure the best deal with the US that is in our national interest.”

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Production output increased 1.5% month on month and construction output 0.4%. Services output also increased, by 0.3%.

GDP had been expected to only rise by about 0.1% month on month.

Anna Leach, chief economist at the Institute of Directors, said it was particularly good to see “pretty broad-based strength, with an acceleration in retail sales and travel services pointing to signs that consumer spending might be lifting, and a pickup in manufacturing, including car sales.”

However, overall car sales remain 10% down on the year amid a range of pressures, both global and domestic.

She added that although the UK government’s approach on US tariffs was the correct one, “unfortunately, global policy uncertainty seems likely to remain high for the foreseeable future, and this will slow decision-making and raise financing costs for business, above and beyond the direct impact of tariffs”.

This meant it was even more important for the government to pursue stronger growth via as many channels as possible, including stronger industrial and trade strategies, deregulation, a pragmatic approach to the net-zero transition and unleashing the benefits of AI.

Nicholas Hyett, investment manager at Wealth Club, also emphasised that President Trump’s actions had somewhat dated the ONS figures. He said: “Nonetheless, the picture it paints is a rosy one, as output grew across all three major sectors. The manufacturing sector grew rapidly, while consumer services also show signs of healthy progress. Overall growth of 0.5% in a month is genuinely impressive, far faster than either the market or we had expected, and in the absence of disruption would have been a sign the UK economy was evolving nicely.”

But he added: “Donald Trump has upended the global trade system. That could have caused UK economic growth to go extinct – making today’s numbers a fossilised window into a lost world.”

Hiring activity declines

Despite the better news on growth from February, March’s Report on Jobs from KPMG and the Recruitment & Employment Confederation, based on survey data from recruitment consultancies and employers, continued to indicate continued weakness in the UK labour market.

Hiring activity declined again, with economic uncertainty, tighter budgets, and lower client demand cited as key factors. Permanent staff placements fell for the 31st consecutive month, with the rate of decline unchanged from February. Temporary billings also dropped, but at the softest rate in three months.

Labour supply rose sharply, marking the fastest increase since December 2020. Both permanent and temporary staff availability improved, largely due to redundancies and fewer job opportunities.

Demand for staff remained subdued. Although the pace of vacancy decline eased, March marked the 17th straight month of contraction. The seasonally adjusted vacancy index rose to 44.2—its highest level in five months. Permanent vacancies continued to fall for the 19th month running, while temporary job openings also declined, albeit at a slower rate.

Sector-wise, public sector vacancies dropped more sharply than those in the private sector. The steepest fall was in permanent public sector roles, while the softest was for private sector temp positions.

Starting salaries edged up from February’s four-year low but stayed below the long-term average. Temp wage growth also improved slightly but was modest. Recruiters noted that while some firms increased pay to attract skilled candidates, limited budgets, weak demand, and better staff availability curbed wage growth.

Jon Holt, chief executive and UK senior partner at KPMG, said of the March figures: “Recent global events have put pressure on growth prospects in the UK, so it is unlikely that we well see an improvement in the data in the near term. Therefore, redoubling employee engagement programmes and maintaining morale for existing employees will ensure businesses are ready to take advantage of any green shoots when they do appear.”

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