The UK economy posted a surprise expansion in the final quarter of 2024, with GDP rising by 0.1%, according to figures released by the Office for National Statistics (ONS) today.
The growth offers a rare positive development for finance minister Rachel Reeves amid broader economic challenges.
Economists surveyed by Reuters had predicted a 0.1% contraction for the quarter, making the modest expansion an unexpected outcome. The uptick was largely driven by a stronger-than-anticipated performance in December, when GDP grew by 0.4% compared to the previous month. This exceeded forecasts of 0.1% growth, with the services sector—Britain’s largest—expanding by 0.4%.
Despite this headline growth, per capita national output declined by 0.1% due to a rising population, underscoring continued pressure on living standards and public finances.
For the full year, the UK economy grew by 0.9%, reflecting a mixed performance. The first half of 2024 saw moderate growth as the country emerged from a mild recession in late 2023. However, momentum slowed in the latter half of the year, with GDP stagnating in the third quarter.
Looking ahead, economic forecasts remain cautious. The Bank of England recently cut its 2025 growth projection to 0.75%, down from previous estimates, though independent forecasters such as the National Institute of Economic and Social Research are more optimistic, expecting growth of 1.5%.
Businesses have expressed concerns over a £25 billion rise in employment taxes introduced in the Labour government’s first budget on October 30. Many firms warn they may respond by reducing staff or increasing prices. Other economic headwinds include sluggish demand in Europe, higher energy costs, and potential disruptions to global trade due to tariffs imposed by U.S. President Donald Trump.
In response, Reeves and Prime Minister Keir Starmer have introduced measures to streamline planning approvals and ease regulatory burdens to bolster business confidence. However, with borrowing costs on the rise and the broader economic outlook subdued, Reeves may face difficult fiscal decisions. If government forecasts next month indicate a worsening financial position, she may need to implement spending cuts to adhere to her self-imposed borrowing limits. Photo by Diliff, Wikimedia commons.