The UK Economy grew by 0.6% this year, meaning it continued to grow from April to June. The economic data shows the UK economy is sustaining the exit from the recession at the end of last year.
Was Growth Forecasted?
This growth seen in April to June was on track with the previous first three months of the year, at 0.7%.
Where Did the Growth Come From?
Growth primarily came from the services sector, particularly the scientific research sector, the IT industry, and the legal sector.
The Biggest Contributor
The financial services sector is the most significant contributor to the UK economy, compared with the smaller manufacturing and construction industries, both of which saw falls in growth from April to June 2024.
Stronger Growth Seen
Liz McKeown, director of economic statistics at the ONS, stated, “The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year,”.
Coming Out of Recession
We are seeing growth compared to a decrease in GDP following late last year. This negative rate of growth saw us in a recession last year. A recession is three quarters in a row with shrinking economic activity.
Overall Expansion in GDP
In the last quarter, overall GDP growth increased. While June was flat, this was due to flat growth in the services sector for this month only.
Strikes Affect Growth
Junior doctors went on strike, which negatively affected growth. The NHS reported 61,989 appointments were canceled between 27 June and 2 July 2024. This was due to decades of no or little pay rises for junior doctors from the previous Conservative governments.
Slow Growth
Leading economists reported that growth was likely to be slow in the last half of this year, but given a sluggish UK economy for almost a decade, any growth is welcome.
Interest Rates Affecting Growth Rates
The chief economist at the Institute of Directors, Anna Leach, adds that reduced activity over the summer months is “no doubt affected by still high interest rates”.
Interest Rates Cut
The Bank of England reduced interest rates from 5.25% to 5% in August, its first reduction in four years.
What Should the Government Do?
Ms Leach added: “The challenge for the government is to firmly lift the UK’s growth performance out of the doldrums,”.
Infrastructure Projects a Solution for Growth?
Ms Leach commented, “There are no quick fixes here: we’ll need the government to follow through on its manifesto commitments to set and stick with long-term infrastructure investment plans.”.
Labours Promises
Labour won a landslide victory. This victory was on the manifesto’s promises to increase growth and make the economy a key battleground for change. Sir Keir Starmer pledged to “take the breaks off Britain”.
Planning System Changes
Starmer said at the King’s speech that changes to the planning system were going to be made to make it easier to build infrastructure and homes.
How Much of a Challenge Is Growth?
Rachel Reeves, the Chancellor of the Exchequer, said: “The new government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth.”.
Conservatives Praising Growth
Jeremy Hunt, the shadow chancellor, said the latest GDP figures “are yet further proof that Labour has inherited a growing and resilient economy” – a claim disputed by Labour.
Manufacturing Slumps
The three months up to June showed manufacturing down on growth, with growth only present in June.
What Does the Construction Industry Think?
Mathew Knight, from a Birmingham-based firm involved with automation, said, “Business is very good; we’re very busy. We can sell into different countries; if one area or country isn’t doing well, we can sell into another.”
Interest Rate Change Effects
Knight added, “Interest rates falling might have something to do with it because many customers finance their equipment, rather than purchasing it directly.”
The Construction Sector Has a Negative Growth
The ONS reported that overall the construction sector shrunk by 0.1% while other construction areas, such as repair and maintenance, grew.
ONS Predictions for Construction
The ONS has said that sluggish growth will decrease. Business is pessimistic that “any improving sentiment is not expected to translate to activity until later this year”.
Indicators for Inflation
Although the economy is growing, inflation is on the rise again. This may mean a slower decrease in the Bank of England’s base interest rate. This will ultimately slow growth down for the UK’s economy.
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