The UK economy grew by 0.1 per cent in the last three months of 2024, according to the Office for National Statistics’s latest report. December, when the economy expanded by 0.4 per cent (the market consensus had been 0.1 per cent), was the saving grace. This helped tip the final quarter of 2024 onto the right side of positive growth. Talk of recession will quiet down, at least for now. But this morning’s update is not going to take anyone in No.10 or the Treasury off high-alert.
Monthly growth in December was stronger than expected, mainly thanks to a continued rise in services activity and a recovery in production from November. The positive growth figure reported for the final months of 2024 means the UK looks like it will avoid a technical recession anytime soon (the measurement being two consecutive quarters of negative growth). But this was indeed a (small) recovery from a dismal autumn. The three months combined – October, November and December – amounted to an ‘all-but stagnating’ economy, as Capital Economics describes the numbers this morning.
Britain may not be on the brink of recession, but the country's economy is hardly generating much growth. The forecasts for doing so only seem to be worsening, as was revealed this week when the Office for Budget Responsibility reportedly downgraded their (already-lacklustre) predictions for GDP in the coming years. While the talk this morning is of stagnation rather than recession, it should be noted that this morning’s update is the first estimate for December and Q4 figures: possible revisions next month could see a change, in either direction, that shakes up the narrative. A relatively small revision downwards could quickly reignite talk of recession.
The 'R' word has not wholly disappeared this morning. The ONS reveals that GDP per capita did experience another contraction, falling by 0.1 per cent in Q4 last year. This follows a 0.3 per cent contraction in Q3, what shadow business secretary Andrew Griffith is calling the ‘GDP per head recession’.
GDP per head is indeed down 0.1 per cent for 2024, reflecting the country’s living standards. The government will no doubt want to focus instead on the positive growth figures this morning. December’s figures were a welcome surprise. But the problem remains the same for Labour as it did for the Tories: you can’t convince people to feel better off than they do. Moreover, it’s very difficult to make the case that 0.1 per cent growth is really evidence that the UK is on secure economic footing. Small changes – or a revision – could produce a negative growth figure instead.
As the Chancellor Rachel Reeves grapples with downgraded economic forecasts and higher borrowing costs, 0.1 per cent growth in Q4 last year is not going to plug the serious gaps emerging in the public finances. So long as stagnation continues, the choices around tax and spend will only become more difficult.
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