The UK economic system grew fractionally in the course of the remaining three months of 2024, in line with early official figures, which ease the instant threat of a recession.
The Workplace for Nationwide Statistics (ONS) reported a 0.1% rise in gross home product (GDP) in the course of the fourth quarter, with solely a restoration for progress in Christmas spending and manufacturing throughout December coming to the rescue.
Economists had been largely anticipating a contraction of 0.1% for the three month interval following a zero progress studying for the earlier three months to September.
Cash newest: Response as economic system reveals shock progress
The chance of shallow recession continues to be there, nonetheless, as a result of the margins between contraction and progress are so tight within the information that probably future revisions might tip the stability both manner.
The broader ONS figures confirmed that throughout 2024 as an entire, complete GDP grew by 0.9%.
However a closely-watched measure for dwelling requirements within the economic system, GDP by head of inhabitants, confirmed a contraction for 2 consecutive quarters.
The figures preserve intense stress on the federal government because it has made reaching financial progress its precedence for the parliament.
Its time period didn’t start in a manner that will bolster enterprise and client confidence.
Evaluation: Why reduction over economic system could also be non permanent
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4:26
Starmer defends dealing with of economic system
Prime minister Sir Keir Starmer and his chancellor have been accused of an personal objective final summer season after warning of a troublesome price range forward to bolster dire public funds.
Whereas October’s measures have been geared toward sparing ache from working individuals, firms argue that hikes to employer Nationwide Insurance coverage contributions from April will knock funding, drive job cuts, and affect pay rises.
Why reduction over economic system in Downing Road could also be non permanent
Ed Conway
@EdConwaySky
Sure there are all types of provisos. The UK economic system continues to be flatlining. A 0.1% enlargement, in a single key measure, is about as shut as you will get to zero.
Gross home product per head – a greater measure of our dwelling requirements – is shrinking (certainly, it has been shrinking for 2 quarters). And the UK stays far weaker than the main G7 economic system – the US.
However even after taking all that into consideration, it is onerous to not conclude that the chancellor might be celebrating in the present day’s GDP figures. In spite of everything, economists had anticipated the economic system to shrink by 0.1% quite than rising. Because of a late spurt in progress in December, it truly grew.
Furthermore, up till in the present day’s figures, the profile of financial progress within the UK was frankly fairly dismal. There was zero cumulative progress since final yr’s election. Now, due to that leap in December – an sudden late Christmas reward for the chancellor – cumulative progress because the election is now as much as 0.4%.
In fact, none of this adjustments the larger financial image. The UK economic system continues to be caught in a rut. The big progress in migration lately signifies that, as soon as you’re taking account of the rising inhabitants, there may be significantly much less revenue floating round for each household than there was a number of years in the past.
And huge swathes of the UK economic system are in determined bother. Most notably, the commercial sectors that used to energy a lot of the nation’s progress, are contracting at a speedy charge. That isn’t only a UK downside – certainly, it is shared with a lot of Europe. In Germany, the economic system has contracted for 2 successive years. This deindustrialisation is without doubt one of the most vital points going through the continent.
And that is earlier than one considers a number of different awkward points: the true affect of final October’s price range have but to be felt within the economic system. The Workplace for Price range Duty is broadly anticipated to slash its progress forecasts subsequent month, which might immediate the chancellor to additional trim spending within the coming years.
Then there are different, much more profound challenges. What occurs if and when the US imposes far-reaching tariffs on UK imports? How will the UK afford the dramatic will increase in defence spending the White Home is demanding? Now, greater than ever earlier than, it is fairly believable that outdoors occasions trigger outsize impacts on the UK economic system.
Briefly, whereas in the present day’s numbers might be a reduction in Downing Road, it isn’t altogether clear how lengthy that sense of reduction will final.
That backdrop is made extra painful by the truth that inflation is on the rise once more, with a slew of important payments together with these for water, power and council tax all set to rise sharply within the spring too.
Concurrently the home difficulties, international progress can be being challenged by Donald Trump who had threatened on the time of his election victory that common commerce tariffs have been imminent.
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5:30
Financial institution governor on “depressing” progress outlook
New projections from the Financial institution of England final week made for sobering studying, with inflation expectations for this yr hitting 3.7% from the present 2.5%.
Development, the forecast urged, would are available at 0.75% for 2025.
In November, the Financial institution had anticipated a determine double that sum.
An absence of progress is an issue for chancellor Rachel Reeves because it sometimes hits potential tax receipts at a time when her price range guidelines over the general public funds are already underneath pressure.
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It emerged on Wednesday that the Treasury had ordered a leak inquiry following a Bloomberg report that up to date Workplace for Price range Duty forecasts despatched to ministers had downgraded UK progress expectations.
Ms Reeves stated of the ONS information: “For too long, politicians have accepted an economy that has failed working people. I won’t.
“After 14 years of flatlining dwelling requirements, we’re going additional and sooner by means of our Plan for Change to place more cash in individuals’s pockets.
“That is why we are taking on the blockers to get Britain building again, investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand.”
Shadow chancellor Mel Stride responded: “The chancellor promised the fastest-growing economy in the G7, but her budget is killing growth.
“Working individuals and companies are already paying for her decisions with ever-rocketing taxes, a whole lot of 1000’s of job cuts and enterprise confidence plummeting.
“It does not need to be this way.”
