UK economy grew by 0.7% in early 2025; Lincolnshire oil refinery enters administration
The UK economy delivered a stronger-than-expected performance in the first quarter of 2025, growing by 0.7%, according to official data released by the Office for National Statistics (ONS). This marked the fastest quarterly growth in over a year, but the good news was tempered by a blow to Britain’s industrial base as the Prax Lindsey Oil Refinery in Lincolnshire entered administration.
Economic Growth Outpaces Expectations
The 0.7% increase in GDP between January and March 2025 was driven largely by robust export growth, a rise in business investment, and continued resilience in the services sector. Exports of goods surged by 5.6%, as companies rushed to ship products ahead of expected tariffs stemming from the new UK-US trade regime set to take effect later this year. Services exports also rose by around 2%, contributing to the trade-driven momentum.
Business investment saw a notable boost, with gross fixed capital formation increasing by 2.9%, particularly in machinery, transport equipment, and IT. Economists point to improved business confidence and one-off spending ahead of scheduled tax changes as major contributing factors.
The production sector—particularly manufacturing—grew by 1.1%, while the services sector expanded by 0.7%. Construction, however, remained flat, with delays in housing projects and commercial developments weighing on performance.
Despite this growth, concerns persist. Real household disposable income fell by 1% in the same period, as inflation remained above 3% and wage growth struggled to keep pace. The household saving ratio also declined to 10.9%, reflecting growing pressure on personal finances.
Bank of England officials have cautioned that the first-quarter performance may not be sustainable. Temporary boosts, such as the export surge and investment front-loading, could fade, leading to slower growth in subsequent quarters. April data already indicates a potential contraction of 0.3%.
Lindsey Oil Refinery Enters Administration
While the UK’s economic figures brought some optimism, the collapse of the Prax Lindsey Oil Refinery in North Killingholme, Lincolnshire, cast a shadow. The refinery, one of only five major operational oil refineries in the UK, has entered administration following heavy financial losses.
Prax Group, which acquired the facility in 2021, cited cumulative losses of approximately £75 million, worsened by high energy costs, declining profit margins, and operational challenges. The refinery employed around 400–420 workers, and its administration raises concerns about job security and regional economic impacts.
Energy Secretary Ed Miliband described the news as “deeply troubling” and called for an urgent review into the company’s financial management. The government is now exploring options to maintain fuel supply security and prevent further job losses.
Administrators from Teneo have been appointed and are currently assessing whether the site can be sold or restructured. Industry observers warn that if no buyer is found, the UK could face increased reliance on imported fuel—raising further questions about long-term energy resilience.
A Mixed Picture
The start of 2025 has presented a mixed picture for the UK. While GDP growth has shown resilience, structural weaknesses—such as falling household income and industrial closures—remain. The coming months will be critical in determining whether the economic rebound continues or falters amid domestic and global headwinds.
Published: 1st July 2025
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