UK economy increases by 0.1% in an unexpected boost for Rachel Reeves
ONS data showing British national output rose in the final quarter of 2024 defies forecasts of a 0.1% decline.
Britain’s economy unexpectedly picked up in the final three months of 2024, official figures have shown, easing pressure on the chancellor, Rachel Reeves, after flatlining during the summer.
Figures from the Office for National Statistics show gross domestic product rose by 0.1% in the fourth quarter of 2024 – after zero growth in the previous three months – to beat the forecasts of City economists and the Bank of England for a decline of 0.1%.
The latest snapshot will provide a shot in the arm for Labour after Reeves faced intense criticism for denting business and consumer confidence with her £40bn tax-raising October budget.
Monthly figures show the economy grew by a better-than-expected 0.4% in December, fuelled by growth in the UK’s dominant services sector after a strong month for business-facing services. Economists had expected growth of 0.1% in December.
Liz McKeown, the ONS director of economic statistics, said: “The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year.
“Across the quarter, growth in services and construction were partially offset by a fall in production. GDP per head, in contrast, fell back slightly in the quarter.
“In December, wholesale, film distribution and pubs and bars all had a strong month, as did manufacturing of machinery and the often-erratic pharmaceutical industry. However, these were partially offset by weak months for computer programming, publishing and car sales.”
Business surveys after the October budget had indicated a fall in hiring and weakness in private sector activity. Retailers also warned of a disappointing Christmas on the high street.
The latest snapshot showed output in business-facing services increased by 0.2% over the fourth quarter, while consumer-facing services increased by 0.1%.
The production sector – which includes manufacturing and energy – was estimated to have declined for a fifth consecutive quarter, shrinking by 0.8%. Construction output was estimated to have grown by 0.5%.
Reeves said the government was “going further and faster” to grow the economy, which she argued would help put more money in people’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,” the chancellor said.
The housing minister Matthew Pennycook told Times Radio: “Construction numbers are up, but we’re not satisfied by these numbers. But on the other hand, we always knew that there was no silver bullet, no simple remedy to turning around 14 years of economic stagnation.”
The shadow chancellor, Mel Stride, said: “The chancellor promised the fastest growing economy in the G7, but her budget is killing growth.
“Working people and businesses are already paying for her choices with ever rocketing taxes, hundreds of thousands of job cuts and business confidence plummeting. It does not need to be this way.”
Ben Jones, the lead economist at the Confederation of British Industry, said the rebound in activity in December was encouraging, although growth remained lacklustre. “The data supports our view that the loss of momentum in the second half of last year will prove to be a soft patch for the economy rather than a slide back into stagnation,” he said.
Last week, the Bank of England halved its growth forecasts for the UK economy and warned households would come under renewed pressure from rising inflation. It cut interest rates from 4.75% to 4.5%.
Expectations for further cuts were unchanged in financial markets after the GDP data was released on Thursday, with two more reductions expected before the end of the year.
The pound hit a one-week high after the data beat expectations, rising more than half a cent against the dollar at just over $1.25. The UK currency had already been strengthening on Thursday morning, as the markets welcomed the prospect of a peace deal between Ukraine and Russia.
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