The UK economy surprisingly grew for the three months to December last year, official government data reveals.
Gross domestic product (GDP) was forecast to fall by 0.1% in the last quarter of 2024, but figures from the Office for National Statistics (ONS) showed a slight growth of 0.1% instead.
This was largely thanks to an increase in the services sector, which grew by 0.2% in output terms, with construction growing by 0.5%.
The growth in GDP follows a period between July and September when the UK economy stagnated, prompting concerns of a possible recession.
However, real GDP per head – a measure of the population’s output per person – fell by 0.1% in the three months between October and December last year.
Chancellor Rachel Reeves said the government is “taking on the blockers to get Britain building again.”
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Reeves said the party would do this by “investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand.”
Rob Morgan, chief executive investment analyst at Charles Stanley, said: “While not setting the world alight, the year-on-year figure for economic growth of 1.5% is respectable given the challenges of higher inflation and interest rates.
“It is not a time for victory laps, certainly, and the danger of recession hasn’t gone away, but relative to expectations, this is a win for the Chancellor. Concerns of a weak festive period did not transpire, and it offers something to build on this year.
“Overall, it appears likely there will be a continued small improvement, at least in the short term. Consumers and businesses will continue to benefit from falling interest rates, with three cuts made in the past six months or so. The boost to government spending should also provide a temporary uplift.”
Morgan said that, due to “fragility in the economic environment”, the Bank of England would not regret cutting the base rate to 4.5% last week.
He added: “Its greater focus on the growing risks to growth is still very much warranted.
“However, lingering economic resilience reduces the likelihood of a back-to-back cut coming in March and turns the focus more to inflationary pressures that may prove difficult to flush out of the system.”
‘Underscores challenging economic environment’
Richard Flax, chief investment officer at Moneyfarm: “This minimal increase underscores the challenging economic environment, as the government continues to search for ways to stimulate growth.
“There is also growing concern about the potential impact of US tariffs on the UK economy – directly and indirectly. The uncertainty around global trade policy makes it harder for businesses to plan for the future and can dampen still fragile consumer confidence.
“As policymakers and businesses digest these GDP figures, they are likely to remain focused on the challenge of generating stronger economic growth against [the] backdrop of uncertainty around tariffs.”
Flax added: “It is likely to prove a struggle, though. Many government initiatives including housebuilding and infrastructure investment could be hamstrung by a lack of construction and other skilled workers.
“Meanwhile, consumer confidence and spending could be jeopardised by a deteriorating employment picture, plus some businesses are expected to retrench following Budget measures that involve higher employment costs.”
This article was first published on Mortgage Solutions‘ sister site, YourMoney.com. Read: ‘No time for victory laps’ as UK economy grows by 0.1%
