UK economy shows surprise growth of 0.1 percent in Q4 2024

Britain's economy grew by 0.1 percent in the final quarter of last year, figures from the Office for National Statistics showed on Thursday, offering some rare respite from the downbeat economic picture facing finance minister Rachel Reeves.

Economists polled by Reuters had forecast that British gross domestic product would shrink by 0.1 percent in the fourth quarter.

GDP rose by 0.4 percent in December from November, much stronger than the 0.1 percent forecast and driven by stronger-than-expected 0.4 percent growth in the large services sector.

However, adjusted for a rising population national output per capita fell by 0.1 percent in the quarter, highlighting the ongoing pressure on living standards and the public finances.

Across 2024 as a whole, total GDP grew by 0.9 percent.

Last week the Bank of England halved its forecast for growth in 2025 to 0.75 percent, although other forecasters such as the National Institute of Economic and Social Research remain more upbeat with a 1.5 percent growth forecast.

Britain's economy recorded moderate growth in the first half of 2024 as it emerged from a shallow recession in the second half of 2023, but slowed in the second half, recording zero growth in the third quarter of the year.

Businesses complained about a 25 billion-pound (HK$243.4 billion)rise in employment taxes announced in the new Labour government's first budget on October 30 and have said they plan to cut staff and raise prices in response.

Other headwinds include weak demand elsewhere in Europe, higher energy prices and the prospect of a slowdown in global trade due to tariffs under US President Donald Trump.

Reeves and Prime Minister Keir Starmer have announced measures to reduce planning permit delays and others regulatory barriers in a bid to boost confidence.

But a rise in borrowing costs and the subdued economic picture mean Reeves may be forced to announce spending cuts if she is to stay within her self-imposed borrowing rules when government forecasters update their projections next month.

REUTERS