GDP and trade boost for Chancellor but headwinds remain

According to today’s ONS trade data, the total goods and services trade deficit narrowed by £3.6 billion to a deficit of £6.6 billion in Quarter 1 2025, compared with the previous quarter.

The trade in goods deficit narrowed by £4.3 billion to £55.2 billion in Quarter 1 2025, while the trade in services surplus is estimated to have narrowed by around £0.7 billion to £48.6 billion.

Exports of goods to the United States increased for the fourth consecutive month; there was a £2.4 billion rise in Quarter 1 (Jan to Mar) 2025, while imports of goods from the United States rose by £1.3 billion.

It follows today’s GDP data which showed a surprise uptick of 0.7% in the first three months of the year.

Today’s data will be a happy surprise for the Chancellor, reinforcing this week’s strong labour market figures and suggests that the economy is holding up well in the face of volatile geopolitical and economic conditions.

It comes hot on the heels of two major trade deals with the United States and India, offering a much-needed ray of light for businesses navigating through a storm of uncertainty.

With President Trump seemingly easing off the tariff warpath, many firms will be cautiously optimistic about a period of reduced market turbulence, easing inflationary pressure, and improved supply chain stability.

But while momentum is building, the path ahead remains uncertain. The UK’s deal with the US is far from finalised, and geopolitical tensions – particularly between the US and China – still pose a risk of disruption. Beijing’s criticism of the UK’s recent agreement with US is a reminder that the UK remains exposed to wider trade dynamics.

In this environment, UK businesses must remain agile. Reviewing FX hedging strategies and ensuring access to flexible finance will be key to navigating what is still a volatile and fast-changing global trade landscape.