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The UK financial system unexpectedly grew by 0.1 per cent within the fourth quarter, in a modest enhance for Labour because it seeks to fulfil its pledges to re-energise the financial system.
The GDP determine for the ultimate three months of the 12 months from the Workplace for Nationwide Statistics marked a rise on the zero progress within the quarter that resulted in September, however remains to be according to an financial system that’s struggling to realize momentum.
Economists had forecast a 0.1 per cent fourth-quarter contraction, in response to a ballot from Reuters.
The figures had been lifted by a robust efficiency in December, when GDP progress expanded 0.4 per cent from the earlier month, pushed by the UK’s dominant companies sector.
The pound strengthened after the info launch on Thursday, up 0.4 per cent in opposition to the greenback at $1.249.
Chancellor Rachel Reeves has vowed to make progress the federal government’s chief mission, throwing her help behind tasks together with a 3rd runway at London’s Heathrow airport and transport hyperlinks between Oxford and Cambridge.
However the financial system has repeatedly disenchanted since Labour took energy, largely stagnating within the second half of final 12 months. Actual GDP per head is estimated to have fallen 0.1 per cent within the fourth quarter, the ONS stated.
The most recent knowledge capped a “disappointing 12 months for progress”, stated Hailey Low, an economist on the Nationwide Institute of Financial and Social Analysis.
“Low enterprise and client confidence recommend that 2025 begins on shaky floor, with weak funding and cautious client spending hindering momentum,” she added.
Over the entire of 2024, the financial system expanded by 0.9 per cent, the ONS stated, a modest enchancment on enlargement of 0.4 per cent the earlier 12 months.
Nevertheless, the primary half of the 12 months was stronger than the second, and the annual determine fell wanting predictions in October by the Workplace for Finances Accountability, the UK fiscal watchdog.
Annual progress was additionally far beneath that recorded within the US, the place GDP expanded by 2.8 per cent in 2024.
Reeves is braced for a tricky fiscal outlook from the OBR subsequent month, partly due to the poor efficiency of the financial system.
The watchdog is anticipated to chop its progress forecasts within the upcoming Spring Assertion, hitting tax revenues and including to the fiscal pressures dealing with the chancellor.
The OBR advised Reeves final week that the headroom she beforehand had in opposition to her key funds rule had been worn out by components together with poor financial knowledge.
Economists stated the comparatively weak fourth-quarter efficiency could partly replicate downbeat company sentiment following Reeves’ first Finances, by which she introduced larger employer nationwide insurance coverage contributions.
Thursday’s figures confirmed a 3.2 per cent drop in enterprise funding within the fourth quarter, in addition to a drag from weak commerce efficiency.
The modest quarterly enlargement was propelled by larger companies and development exercise, whereas industrial manufacturing fell for the fifth consecutive quarter.
Economists stated the newest figures level to a subdued image for 2025. “With enterprise sentiment on the ground and employment declining, it’s arduous to see non-public sector exercise enhancing a lot within the first or second quarters,” stated Paul Dales at Capital Economics. “The financial system is unlikely to do greater than transfer sideways over the following six months.”
Responding to Thursday’s GDP figures, Reeves stated: “For too lengthy, politicians have accepted an financial system that has failed working folks. I received’t. After 14 years of flatlining residing requirements, we’re going additional and sooner by means of our Plan for Change to place more cash in folks’s pockets.”
Mel Stride, the shadow chancellor, stated: “The chancellor promised the quickest rising financial system within the G7, however her Finances is killing progress.”
James Smith of ING stated that whereas the ONS had forecast 2 per cent progress this 12 months, the UK financial system could broaden at simply half that tempo. “The lacklustre finish to 2024 will solely cement the lack of fiscal headroom the Treasury should now grapple with,” he stated.
Extra reporting by Ian Smith
