The UK economy grew by 0.1% in the fourth quarter of 2024, against expectations for a 0.1% decline, according to the Office for National Statistics.
December saw GDP growth of 0.4%, above forecasts for a 0.1% rise.
For 2024, the UK economy grew by 0.9%, above the 2023 growth of 0.3%. At the last Bank of England meeting, its forecast for 2025 GDP growth was cut from 1.5% to 0.75%. GDP is then expected to pick up in 2026 and 2027.
Economic growth has become the main focus of the new Labour government, which took power in 2024 for the first time in 14 years.
Recent growth figures have not helped the government’s cause, however, with no growth in the third quarter.
“Structural issues remain with some sectors of the UK economy, but December saw positive growth in both manufacturing and industrial production. While we await the effects of potential tariffs on UK goods from the US, we take the positives where we can get them,” says Michael Field, chief market strategist, EMEA, at Morningstar.
“Interest rates have fallen by 75 basis points from the peak, with the market expecting another 65 basis points of cuts this year. The cuts may be coming at a slower pace than markets would like, but over time these cumulative cuts should help create a more supportive economic environment for businesses.”
UK GDP Grows: What the Experts Say
Daniel Mahoney, UK economist at Handelsbanken:
“While it is welcome that the UK avoided contraction at the end of 2024, other data within this morning’s release continue to suggest that growth prospects look weak in 2025, particularly on the private sector side. For example, on a q-o-q basis in Q4 business investment fell by 3.2% and exports dropped by 2.5%, while the key areas of growth were government consumption and government investment.
“Additional spending announced at the Budget will help to prop up UK growth this year but negative sentiment being expressed in business and consumer surveys will likely continue to weigh on private sector activity. Our latest global macro forecast suggests growth of just 1% in 2025, with risks to the downside not least due to the potential for escalating global trade disruption.”
Guy Foster, chief strategist at RBC Brewin Dolphin:
“A survey showed two-thirds of forecasters expected UK GDP to have declined during the fourth quarter, but their pessimism was confounded – for now. The UK economy appears to have grown modestly in the final quarter, by 0.1%.
“Obviously that sounds pretty underwhelming, but it was achieved with a very strong December. Although some surveys have shown diminishing activity, retail sales have been on an upward trend, housing demand is very strong and the bank of England seems keen to provide monetary support.
“This is important, as there are greater hurdles ahead with employment growth slowing in the face of the steep increase in employment taxes and increases in stamp duty due in April.”
Scott Gardner, investment strategist at J.P. Morgan owned digital wealth manager, Nutmeg:
“A pleasant surprise, but we’re not out of the woods yet. Beneath the surface of these latest figures, domestic demand via consumption and business investment was weaker than expected. What will worry some is that we are also yet to see the full impact of the measures announced in the Autumn Budget including changes to National Insurance contributions.
“Those with a more optimistic outlook will hope this is a sign we’re over the worst; while others may fear this was a small period of unexpected growth and a more prolonged UK economic slowdown may stretch well into this year.
“Looking ahead, we continue to believe that the housing market is key for a sustained uptick in growth through 2025 beyond the rush to beat the Stamp Duty increase in April. Lower interest rates will definitely help policymakers, but so will a recovery in consumer confidence. If growth remains poor, this will continue to weigh more heavily on the domestic-facing FTSE 250.”
Neil Birrell, chief investment officer at Premier Miton Investors and lead manager of the Premier Miton Diversified Fund range:
“The UK economy did better than expected in the final quarter of last year, at least showing some growth, warding off claims of stagflation, for now anyway. However, it would be incorrect to be talking about an economy that is in good health, after all, it only grew at 0.1%. Worryingly, business investment fell sharply, displaying the level of confidence in the corporate sector at present. The data is better than expected, but nothing to get excited about.”
Rob Morgan, chief investment analyst at Charles Stanley:
“Having slumped to no growth in the third quarter, a 0.1% increase was confirmed for the final three months of the year driven by expansion in services. It provides some rare relief for Chancellor Rachel Reeves as economists had previously expected a slight contraction for the month, which would have meant the economy came within a whisker of recession.
“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.”
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