UK Economic Growth Negligible in Latest Figures

The Office for National Statistics (ONS) figures that the UK economy grew by 0.1% in February, sparking hopes that the economy is emerging from recession.

Manufacturing and Construction Key Movers

Particular highlights were found in production and manufacturing. From the ONS, Liz McKeown said: “The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little, with public transport, haulage, and telecommunications having strong months.”

The data particularly highlighted car manufacturing. The sector’s data showed a 17.8% increase in production compared to the same time last year.

Service Industry Inline With General Data

Figures from the UK service industry, which makes up the bulk of the UK economy shows that activity grew by 0.1%, in line with the rest of the economy. It wasn’t all good news though. Persistent wet weather has impacted new building work, leading to a 1.9% fall in construction activity in the period.

The fourth wettest February on record has been blamed for slow growth in services and distribution. In poor weather, people are less likely to venture out to shops, restaurants, pubs, etc., impacting the service sector.

Not Out of Recession…Yet

Although the return to growth is welcome news, a recession is two-quarters of negative growth in the economy. In order to be fully out of recession, the economy will have to maintain growth in March as well.

Paul Dales, the chief UK economist at Capital Economics, commented on the growth: “As a result, we can safely say, after lasting just two quarters and involving a total fall in GDP of just 0.4% or so, that the recession ended in the fourth quarter.”

The fall in energy bills, slowing of food price inflation, rising wages, and slightly lower borrowing costs from the 2023 high suggest some households might be loosening the purse strings.

Tories Keen to Leap on the News

Chancellor Jeremy Hunt said the figures were a “welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan”.

In another boost for the government, the ONS revised its January figures for the gross domestic product (GDP) from 0.2% growth up to 0.3%. This is a timely boost when looking for any good news.

Sunak Under Pressure on Economy

Rishi Sunak’s leadership has been plagued by the cost-of-living crisis, and he’ll be desperate to report any good news. The economy’s strength can be a real vote winner in an election year.

There’s hope among government members that a cut to National Insurance in the budget might help families feel better and spend more, further boosting the economy. We’ll know whether it has in a couple of months’ time.

Labour Not Impressed With Growth Figures

Labour shadow chancellor Rachel Reeves, said: “Britain is worse off with low growth and high taxes”. She went on to say: “The Conservatives cannot fix the economy because they are the reason it is broken.”

Paul Nowak, the general secretary of the Trades Union Congress, said: “Our economy is still smaller than this time last year, with growth stuck in the slow lane. Real wages are still worth less than in 2008. And millions are struggling to cover their bills. After 14 years of stagnation you’ll be hard-pressed to find many people who feel better off.”

GDP Figures Paint a Choppy Picture

A historical look at UK GDP shows an up-and-down picture. There was a rapid rebounding after COVID restrictions were eased, but this was blunted by supply chain issues and subsequent inflation.

The medium-term weather forecast shows improvements may be on the way, which could inspire families to get out and about more. A summer of sport could also get people into pubs, boosting the sector.

Interest Rate Fall Will Help

If the long-anticipated fall in interest rates materialises, there will almost certainly be an economic upturn. Housing costs are the largest monthly outgoing for most families, so if housing is cheaper, people are willing to spend more.

The stark reality is inflation is still high, and the Bank of England base rate remains at its highest level in 16 years. These two issues alone provide the economy with strong headwinds that won’t ease any time soon.

Regardless of political stance, a strong economy is helpful for everyone. Job security, higher personal wealth, and lower financial stress are never bad things.