The UK economy narrowly avoided a recession in late 2024, registering a slight growth of 0.1% in the final quarter of the year, according to the latest data from the Office for National Statistics (ONS). This growth follows a flat performance in the third quarter, when the economy recorded zero growth. While the country is not in a recession—defined as two consecutive quarters of negative GDP—there are still concerns that the economy remains vulnerable to a shallow downturn.
Key sectors showed mixed results. The services sector grew by 0.2%, while construction expanded by 0.5%. However, the manufacturing sector contracted, with production output falling by 0.8%. December alone saw a stronger-than-expected 0.4% growth, contributing positively to the overall figures for the fourth quarter.
ONS Director of Economic Statistics, Liz McKeown, commented, “The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year.” The report highlighted growth in wholesale trade, film distribution, pubs and bars, and machinery manufacturing, while sectors such as computer programming, publishing, and car sales experienced a downturn.
Despite this growth, GDP per head—adjusted for population changes—fell by 0.1% in the last quarter of 2024, signaling that individual economic well-being may have worsened.
Chancellor Rachel Reeves addressed the growth figures, pledging stronger efforts to address long-standing economic stagnation. “For too long, politicians have accepted an economy that has failed working people,” she said, outlining plans to put more money into citizens’ pockets by investing in infrastructure and removing business barriers.
However, challenges remain. The Bank of England raised inflation expectations for 2025 to 3.7%, up from the current 2.5%. Additionally, the central bank revised its growth forecast downward, predicting only 0.75% expansion for the year—down from an earlier 1.5% forecast. The Office for Budget Responsibility (OBR) is expected to further reduce its growth projections, adding pressure on government finances.
Despite these challenges, the UK’s growth rate remains the highest among G7 European nations. In comparison, Germany’s economy contracted by 0.2% in the fourth quarter, France shrank by 0.1%, and Italy recorded zero growth, reflecting a generally weaker performance across Europe.
Economists are still cautious about the year ahead. Yael Selfin, Chief Economist at KPMG UK, noted, “While today’s GDP data came in stronger than expected, the OBR is still poised to downgrade its growth forecast next month, adding pressure to already tight fiscal plans.”
Lindsay James, Investment Strategist at Quilter Investors, echoed concerns about global uncertainties, particularly the impact of US tariffs and high energy prices, which could further complicate the UK’s economic outlook.
As the UK navigates these challenges, all eyes will be on upcoming policy adjustments and fiscal measures that could shape the country’s economic trajectory for the remainder of 2025.
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