Image source, Getty Images
- author, Michael Race
- role, BBC News Business Reporter
-
Britain has emerged from recession, with economic growth in the first three months of 2024 exceeding earlier forecasts, according to revised official figures.
According to the Office for National Statistics (ONS), the UK economy grew by 0.7% in the first three months of the year.
Figures released last month initially estimated growth at 0.6 percent.
The strength of the economy has become a central issue in the general election campaign, as growth has slowed in recent years.
Most economists, politicians, and businesses want to see a steadily growing GDP because it typically means people are spending more, new jobs are being created, more taxes are being paid to the government, and workers’ salaries are rising.
The ONS said initial figures for the first quarter of the year were stronger than economists had expected, with growth in the services sector, including hairdressers, banking and hospitality, helping to boost the figures.
However, service sector growth was revised upwards while manufacturing growth was revised downwards following increased data collection.
The upward revision made Britain the fastest-growing economy among the G7 group of developed economies in the first three months of the year.
Chancellor and Conservative leader Rishi Sunak welcomed the new revised growth figures, saying the party had a “clear plan to deliver a more secure future for families”.
But Labour accused the Conservatives of “14 years of economic destruction” which has left people’s lives worse off.
“A Labour government will grow the economy and our growth plans will put money back in people’s pockets by showing that the UK is open for business,” the spokesman said.
Liberal Democrat Treasury spokeswoman Sarah Olney said despite the upward revision the figures would be “of no comfort to families struggling with spiralling mortgage repayments, unfair hidden taxes and soaring weekly food shopping costs”.
Paul Dales, chief UK economist at research firm Capital Economics, said the faster rise in GDP growth at the start of 2024 was “mainly driven by upward revisions to consumer spending”.
The ONS said spending on housing and food as well as leisure and culture increased, while household disposable income continued to rise at the start of 2024 as workers secured wage increases.
Dales said this meant the household savings rate rose to 11.1% from 10.2% at the end of last year, the highest rate since mid-2021, when savings increased during the coronavirus pandemic.
He added that the new figures suggested “whoever is chancellor this time next week could benefit from a slightly stronger economic recovery”.
“It’s a very small improvement but every little bit really helps when it comes to UK GDP growth,” said Danny Hewson, head of financial analysis at AJ Bell.
“Growth has been front and centre in party manifestos, even though the parties differ on the finer points of how to achieve it. Economic growth creates wealth, putting more money in people’s pockets and more tax into the depleted coffers of the Exchequer.”
The UK has emerged from the economic recession it fell into in the final months of 2023, but with recent price rises tightening budgets, many households may not feel like things are getting better.
Interest rates are currently at a 16-year high of 5.25%, meaning savers are paying more for mortgages, loans and other borrowings, while also getting better returns.
The latest economic data showed the economy failed to grow in April, especially as wet weather kept people from shopping and slowed construction work.
The Bank of England, which sets interest rates, has signalled it may cut them in August, which would mark the first drop in borrowing costs in more than four years.
“Better than expected growth won’t help those looking for faster rate cuts, but it does help boost overall optimism,” said Sophie Rand Yates, chief equity analyst at Hargreaves Lansdown.
“The UK’s deep-rooted productivity problems are overall a bigger concern than the near-term interest rate outlook,” she added.
