UK economic system unexpectedly grew in remaining months of 2024

The UK economic system unexpectedly grew within the remaining three months of final 12 months following a lift to the development and providers sectors.

The economic system expanded by 0.1% between October and December, in response to official figures, regardless of analysts predicting it will contract.

Development within the quarter was pushed by a variety of industries, from pubs and bars to equipment producers, having a powerful December.

Nonetheless, the figures additionally indicated residing requirements final 12 months had been barely decrease than in 2023 on common.

With tax rises coming into pressure in April, considerations stay that financial progress will stay sluggish for someday.

Companies have warned that paying extra in Nationwide Insurance coverage, together with minimal wages rising and enterprise charges reduction being decreased, might have an effect on the economic system’s capacity to develop, with employers anticipating to have much less money to present pay rises and create new jobs.

The Financial institution of England has additionally halved its progress forecast for the UK this 12 months, amid considerations that larger prices for employers might hit hiring, income, funding – and push up costs. Final week, it determined to chop rates of interest to 4.5%.

Paul Dales, chief UK economist at Capital Economics, stated the economic system was “all-but stagnating” as companies adjusted for larger prices and “extra uncertainty abroad” – pointing to the introduction of commerce tariffs within the US by President Donald Trump.

He stated it was a transparent that “quite a lot of the weak spot” within the economic system was because of the rise in taxes on corporations introduced by Chancellor Rachel Reeves in her Funds final 12 months, with “enterprise sentiment on the ground” and funding and client spending down.

“Total, the economic system is unlikely to do greater than transfer sideways over the following six months,” he recommended.

However the newest figures exhibiting a return to progress on the finish of 2024 will probably be welcome information for the federal government, which has made rising the economic system its prime precedence in its effort to enhance residing requirements.

A separate determine from the Workplace for Nationwide Statistics (ONS) measuring residing requirements fell 0.1% in 2024 in contrast with the 12 months earlier than. The measure – often called actual GDP per head – calculates the quantity of products and providers accessible to the typical particular person within the UK and an individual is deemed higher off the extra they’ve.

When an economic system grows, companies on common have more cash to spend to make use of extra individuals or give pay rises. Corporations making extra income additionally pay extra in tax to the federal government, which will be spent on public providers.

All this collectively, in principle, leaves individuals higher off – but it surely takes time for the advantages to be felt, and it doesn’t essentially profit everybody.

In December alone, the economic system was estimated to have grown by 0.4%.

Movie distribution corporations, pubs and bars all had a “sturdy month”, as did industries concerned in equipment manufacturing, in response to Liz McKeown, director of financial statistics on the ONS.

Nonetheless, this was offset by weak months in commerce for pc programming, publishing and automotive gross sales companies.

Within the building sector, the ultimate months of 2024 noticed a rise in new work pushed by new personal housing initiatives, however repairs and upkeep work from personal properties fell over the interval, suggesting owners in the reduction of.

Sushma Solanki, the proprietor of Bolton catering agency Sushma’s Snacks, advised the BBC the financial state of affairs was “very worrying” as she discovered buying and selling on the finish of final 12 months very robust.

“I usually do about 20 to 30 Christmas workplace occasions,” she stated. “As an alternative, I did two, which was very arduous. Individuals do not have the cash.”

She stated she needed to let go an worker partly due to the upcoming rise in Nationwide Insurance coverage.

“It isn’t simply the insurance policies, it is every thing. Peppers for my hen dish began off at 79p, they’re £1.85,” she added.

Chris Taylor, the proprietor of espresso store Gran T’s in Manchester, stated he was “shocked” that there had been any progress within the economic system.

“Going into final winter was one of many largest struggles. I feel lots of people had been naturally clinging onto their purse strings. Commerce was not there,” he stated.

“This authorities’s motion plan, with out hitting individuals immediately with larger taxes, is hitting the extent above and that successfully goes to hit individuals a technique or one other. It’s actually an oblique punch to the entire economic system.”

Following the discharge of the brand new figures, the chancellor stated she was nonetheless not happy with the efficiency of the economic system.

“It isn’t potential to show round greater than a decade of poor financial efficiency in only a few months, however we’re doing what is critical to carry stability to the economic system,” she stated.

Reeves additionally stated the federal government was going “additional and quicker” to “put more cash in individuals’s pockets”.

She additionally reiterated her self-imposed guidelines on borrowing and debt had been “non-negotiable” after reviews this week recommended the federal government’s official forecaster, the Workplace for Funds Duty, had downgraded progress forecasts.

Shadow chancellor Mel Stride stated Reeves’s Funds was “killing progress” within the UK.

“Working individuals and companies are already paying for her selections with ever rocketing taxes, a whole lot of 1000’s of job cuts and enterprise confidence plummeting,” he added.

Liberal Democrat Treasury spokesperson Daisy Cooper stated the chancellor’s Funds was guilty for “pitiful financial progress”.

“Her full pig’s ear of a jobs tax will hammer small companies, the spine of our economic system.”

Further reporting by Peter Ruddick