UK economy returns to growth

The UK economy has emerged from recession, according to the latest data.

Gross domestic product (GDP) grew by 0.6% between January and March, the Office for National Statistics (ONS) said.

This is the fastest growth for two years, and above the 0.4% predicted by economists.

It follows two quarters of contraction in the second half of 2023 as consumers cut back on spending amid high inflation and energy bills.

Services such as retail, public transport, haulage and health were the biggest driver of growth in the first three months of the year. Car manufacturers also had a good quarter.

This was offset slightly by another weak quarter for construction.

Continued growth is expected for the rest of the year, according to Yael Selfin, chief economist at KPMG UK.

“Falling inflation and real pay increases should help repair some of the damage to household incomes and support households’ consumption,” Selfin said. “Growth prospects have also improved in Europe, which could spur a recovery in exports.”

She added that “the worst is behind the UK economy”.

Retail spending lifted UK economy in January

The UK economy grew by 0.2% in January 2024, driven by retail sales and an increase in construction activity.

It comes after gross domestic product (GDP) decreased by 0.1% in December 2023. The economy fell into recession at the end of the year after two consecutive quarters of GDP decline.

“The economy picked up in January with strong growth in retail and wholesaling,” said Liz McKeown, director of economics statistics at the Office for National Statistics (ONS). “Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.

“These were partially offset by falls in TV and film production, lawyers and the often-erratic pharmaceutical industry.”

Over the last three months, the economy contracted slightly.

GDP is estimated to have fallen by 0.1% in November to January compared with the previous three-month period, August to October.

James Smith, developed markets economist at ING, said that the latest data is “consistent with the gradual recovery in activity that we expect over the coming months”.

He added that the GDP decline seen in the fourth quarter of 2023 is “unlikely to be repeated” in the first quarter of 2024.

UK economy in recession at the end of 2023

The UK’s economic output declined for two consecutive quarters in the second half of 2023, pushing the country into recession.

Gross domestic product (GDP) fell by a steeper-than-expected 0.3% in October-December, following a 0.1% contraction from July to September, the Office for National Statistics (ONS) said.

Economists had anticipated a decline of 0.1% in the final three months of the year.

ONS director of economic statistics Liz McKeown said that manufacturing, construction and wholesale were the biggest drags on growth in the quarter, partially offset by increases in hotels and rentals of vehicles and machinery. Across 2023 as a whole, the economy was “broadly flat”.

A recent analysis by Goldman Sachs found that the decision to leave the European Union has left the UK economy around 5% worse off than it would otherwise have been.

The GDP figures come less than three weeks before Chancellor Jeremy Hunt delivers his next Budget.

Responding to the data, Hunt said: “High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high — so the Bank of England can bring inflation down — low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan — cutting taxes on work and business to build a stronger economy.”

UK GDP ‘bounced back’ in November

The UK economy returned to growth in November 2023 after shrinking in October, according to new figures.

Monthly gross domestic product (GDP) grew by an estimated 0.3%, recovering from a 0.3% decline in the previous month when output was affected by heavy rain and strong winds.

The Office for National Statistics (ONS) said that November’s improvement was led by the services sector, including a boost to retail from Black Friday sales.

However, ONS chief economist Grant Fitzner noted that the long-term picture “remains one of an economy that has shown little growth over the last year”.

In the three months to November, the economy shrank by 0.2% with widespread falls across manufacturing, partly offset by increases in public services, which saw less impact from strike action.

Earlier data showed that GDP declined between July and September. If this is followed by a contraction between October and December, the economy will meet the criteria for a recession.

Ruth Gregory, deputy chief UK economist at Capital Economics, said that the rebound in November “probably means the economy escaped a recession in 2023”, but the final quarter is likely to show zero growth.

UK economy declined in October

The UK economy shrank by 0.3% in October, following 0.2% growth in September.

Heavy rainfall and strong winds contributed to the decline in output, the Office for National Statistics (ONS) said.

The services, manufacturing and construction sectors all contracted but services were the biggest driver of October’s fall, with declines in IT, legal services and film production. These were compounded by widespread falls in manufacturing and construction, partly due to the poor weather.

Chancellor Jeremy Hunt said it was “inevitable” that gross domestic product (GDP) growth would be subdued while “interest rates are doing their job to bring down inflation”. 

Across the three months to October, GDP was flat.

Responding to the data, the Resolution Foundation said that the UK is a “stagnation nation”, with the past 18 months seeing just 0.5% growth — the weakest on record outside of a recession.

Achieving “stronger, sustained economic growth” is the only way to boost living standards, said James Smith, research director of the think tank.

UK economy flatlined in third quarter

The UK economy showed zero growth between July and September 2023 compared with the previous three months, according to new figures from the Office for National Statistics (ONS).

This followed a 0.2% increase in gross domestic product (GDP) between April and June.

A fall of 0.1% in the services sector offset a 0.1% increase in construction output and broadly flat output in the production sector.

Although the latest figures suggest the economy is stagnating, it does mean that the UK will avoid a recession this year — defined as two consecutive quarters of falling GDP.

Economists had predicted that the third quarter would show a slight decline. The quarterly performance was boosted by a stronger September, the ONS said.

“In the month of September the economy grew slightly, with increases in film production, health and education,” explained Darren Morgan, ONS director of economic statistics. “This growth was partially offset by falls in retail and computer programming.”

Compared with the third quarter a year ago, GDP increased by 0.6%.

The chances of a recession in 2024 “look low” according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“We look for a 0.3% quarter-on-quarter increase in GDP in Q4 and expect that pace to be broadly maintained next year,” he added.

UK economy returns to growth

The UK economy grew by 0.2% in August, driven by a strong performance in the services sector, new figures show.

Education recovered from strike action, while computer programmers and engineers also contributed to the improved monthly figure.

The increase in August came after gross domestic product (GDP) declined by 0.6% in July, revised down from the earlier estimate of a 0.5% fall, the Office for National Statistics (ONS) said.

The economy is now 2.1% bigger than it was in February 2020, before the pandemic.

Across the last three months as a whole GDP grew by 0.3%, led by car manufacturing and sales as well as construction.

“The UK economy is holding up but remains in a precarious state,” commented David Bharier, head of Research at the British Chambers of Commerce (BCC).

Bharier highlighted the issues faced by UK businesses, including three years of economic shocks, high inflation and interest rates, skills shortages, and trade barriers with the European Union.

“Businesses need to see a strategic vision for the long-term framework for investment in the UK,” he added. “Recent policy announcements around projects, such as HS2, will have generated more uncertainty for businesses searching for stability.”

UK economy shrank 0.5% in July

Wet weather and strike action in July 2023 caused the UK economy to contract by more than expected, according to the latest figures from the Office for National Statistics (ONS).

Gross domestic product (GDP) fell by an estimated 0.5%, following growth of 0.5% in June.

There were falls in all three main sectors in July.

“Industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather,” explained Darren Morgan, director of economic statistics at the ONS. “Manufacturing also fell back following its rebound from the effect of May’s extra Bank Holiday.”

Despite the poor weather, sports events and theme park visits provided a slight boost to the economy.

The broader picture looks more positive, with GDP increasing by 0.2% in the three months to July 2023.

July’s GDP figures may indicate that a mild recession has already begun, according to Paul Dales, chief UK economist at Capital Economics.

However, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he doubted that the data marked the start of a falling trend, given the one-off drivers of the decrease.

UK GDP shows further growth in Q2

The UK economy expanded by 0.2% in the second quarter following marginal growth of 0.1% in first quarter, new figures show.

Gross domestic product (GDP) is estimated to have grown by 0.5% in June 2023, following a fall of 0.1% in May 2023 and growth of 0.2% in April 2023, the Office for National Statistics (ONS) said.

Darren Morgan, director of economic statistics at the ONS, said that the economy had bounced back from the effects of May’s extra bank holiday for the King’s Coronation.

“Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.

“Services also had a strong month with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action.

“Construction also grew strongly, as did pubs and restaurants, with both aided by the hot weather.”

The Bank of England has forecast that the UK will avoid falling into recession in 2023 but suggested that GDP will remain weak for the next few years.

“The Chancellor is asleep at the wheel while our economy is going nowhere,” said TUC general secretary Paul Nowak in response to the latest monthly figures.

“Stagnant growth puts jobs at risk and holds down pay and conditions for those who remain in work.”

UK economy returned to growth in April

The UK economy grew by 0.2% in April, boosted by strong trade in bars and pubs.

Car sales also rebounded, but house builders and estate agents had a “poor month”, the Office for National Statistics (ONS) said.

April’s GDP growth came after a fall of 0.3% in March.

In the three months to April, the economy grew by 0.1%.

“Over the last three months as a whole the economy grew a little, driven largely by the construction industries,” said ONS director of economic statistics, Darren Morgan. “The services sector dragged growth downwards, partly due to the impact of public sector strikes.”

Commenting on the latest monthly figures, Chancellor Jeremy Hunt said that the UK still has an issue with rising prices, stating that inflation is “the number one challenge we face”.

“If we want growth, if we want prosperity, if we want to remove that worry that families have about the increase in the weekly shop, the cost of living going up, then we have to tackle inflation,” he added.

The Bank of England is widely expected to raise interest rates from the current 4.5% when its Monetary Policy Committee meets next week.