I am a UK citizen studying in the USA.
I need to maintain a GPA of 2 to maintain status. On one term I dropped below a GPA of 2.
I am doing much better this semester. Am I now out of F1 staus or is the GPA averaged over the whole year?

Maybe or maybe not... you need to discuss this matter with international office at your school as soon as possible, so that you know what your situation is like. GPA may not be a big issue when compare with your attendance record. If you go to school full time then it would be negotiable. DHS monitor all international students' attendance closely. This is important..