Recession retreats as economy grows faster than expected
The UK’s economy grew by 0.6% between January and March, according to official figures out this morning.
The figures mean that the country has now officially emerged from recession. Economic growth between January and March was better than expected – the general consensus was that GDP would increase by just 0.4%.
The country had slipped into recession at the end of 2023 after the economy contracted by 0.1% in the third quarter and 0.3% in the fourth quarter.
Growth was led by the service sector which includes hospitality and entertainment -and was helped by an early Easter in March.
The Office for National Statistics added that production also grew.
Chancellor of the Exchequer Jeremy Hunt said the figures are proof that the economy is returning to full health for the first time since the pandemic.
He added: “We’re growing this year and have the best outlook among European G7 countries over the next six years, with wages growing faster than inflation, energy prices falling and tax cuts worth £900 to the average worker hitting bank accounts.”
Rachel Reeves the Shadow Chancellor said: “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good.
“After 14 years of economic chaos, working people are still worse off.
“Prices are still significantly higher in the shops, families are paying hundreds of pounds more on monthly mortgage bills, and the economy is forecast to grow by just one per cent next year.”
The Bank of England predicted that a lack of momentum in the economy means gross domestic product will grow by only 0.5% this year. The Bank’s Monetary Policy Committee kept interest rates unchanged at 5.25% on Thursday but hinted it could cut them in June.
Mike Randall, chief executive at Simply Asset Finance said: “An uptick in GDP cements the growing narrative that 2024 will be a positive year for growth. Inflation is down, interest rates are expected to steadily fall, and more generally we’re hearing from businesses that financial pressures related to energy costs and hiring challenges are waning,
“Maintaining this trajectory into the second half of the year will now hinge on two key factors; prioritising policy that benefits small businesses, and enabling access to finance to support their growth.
“With the prospect of an upcoming general election, we cannot lose sight of reform enabling the firms responsible for 53% of UK business output. If we are to fulfil ambitions of economic recovery in 2024, it will mean tackling head on the obstacles many small businesses have faced while giving them the financial incentives they need to grow.”
Joe Nellis, MHA’s economic advisor and professor of global economy, Cranfield School of Management, said: “The better-than expected 0.6% rise in this quarter’s GDP data shows that while the UK has experienced a “technical” recession in the second half of last year, it has managed to avoid a full-blown actual recession. While clearly this is positive news, it is too early to start celebrating. Spring has arrived but the green shoots of recovery will need time to take root over the coming months.
“The UK economy has at last picked itself off the floor after flatlining last year but there remain significant underlying concerns about our ability to generate anything more than rather modest growth in the face of so many domestic and global challenges.
“The next government of whatever colour will face a serious trial balancing the books and avoiding stumbling from one economic crisis to the next.”
