The Office for National Statistics figures show that the UK economy is officially out of recession. Data shows the economy grew by 0.6% between January and March.
Latest Figures Better Than Expected
There was an air of caution about today’s figures. Some economists had warned that sticky inflation and a high Bank of England base rate would limit consumer spending, but that doesn’t seem to be the case.
Key Areas of Growth
The figures show that the services industry – restaurants, bars, retailers, public transport, haulage, and health did particularly well.
Signs of Further Growth
These industries also do well in the summer because more people venture outside in the better weather. Years with major sporting tournaments are also great for hospitality businesses.
Hunt Happy With News
Chancellor Jeremy Hunt says: “We’re growing this year and have the best outlook among European G7 countries over the next six years, with wages growing faster than inflation, energy prices falling and tax cuts worth £900 to the average worker hitting bank accounts.”
Hunt Suggesting Good Times Coming Back
“For families that have been having a really tough time, I think they can see that the very difficult decisions we’ve taken in order to get the economy back on its feet after the pandemic, after the energy shock, are beginning to pay off.”
Hunt Defends Strength Against Strikes
“When tackling inflation at 11%, the Bank of England rightly has to put up interest rates, and the government has to make difficult decisions like not caving into public sector pay strikes, which would further fuel inflation.”
Growth Gives the Tories Something to Celebrate
These figures can be interpreted in several ways. Still, one clear point is that it’s the fastest growth the UK economy has experienced in 2 years, so there is something to celebrate.
Claims UK is Flying Under Tory Leadership
Hunt continued, “After 14 years, we have economic prospects where we are going to grow faster than any other major European country. We’ve created more jobs, we’ve attracted more investment than any other major European country.”
Sunak Urges Country to ‘Stick With the Plan’
The Prime Minister took to X, where he said, “The economy has turned a corner. Today’s news proves that. We know things are still tough for many people, but the plan is working, and we must stick to it.”
Labour Not Joining the Celebrations
Reacting to the news, shadow Chancellor Rachel Reeves said, “The numbers are not deserving of the victory lap that Rishi Sunak and Jeremy Hunt seem to want to go on.”
Eyes on Bank of England
Deputy chief UK economist Ruth Gregory said, “the Bank of England doesn’t need to rush to cut interest rates, but the timing of the first interest rate cut will ultimately be determined by the next inflation and labour market releases.”
Economic Growth Shrinks National Debt
When the economy grows, the national debt shrinks in relative terms. While this isn’t a big deal to most people, it’s a useful metric for the government to show some fiscal responsibility.
Concerns Over Economy Linger
Despite the recent good news, there’s still caution about the economy. GDP growth is only 0.2% higher than it was between January and March last year.
Slow Growth Over Last 2 Years
We’ve also had the second-lowest growth among G7 economies this year, and the recovery from the pandemic has been slow. This has been hampered by inflation and a high cost of living that has squeezed household finances.
Economists Still Cagey About the Impact on Living Standards
Gora Suri, an economist at accountancy firm Price Waterhouse Cooper, says that households have seen “little meaningful improvement in living standards” in the last two years.
The Institute of Chartered Accountants in England and Wales Remain Cautious
Suren Thiru, Institute of Chartered Accountants in England and Wales economics director, says the bigger picture “remains one of an economy struggling with stagnation, as poor productivity and high economic inactivity limits our growth potential”.
Lack of Investment Still Key
One main reason the UK economy struggles to achieve large, consistent growth is the lack of investment. We still need investment in manpower, training, technology, manufacturing, and infrastructure to see powerful growth returns.
How Will Growth Affect Us?
There’s an initial feel-good factor. When the word recession is used, people often panic and spend less because they’re worried. Strong growth is the reverse of that, so the feel-good factor returns.
Bank of England Still Holds Power
If growth is strong and steady rather than unpredictable, the bank may feel able to lower interest rates as long as inflation is kept under control. That’s when we’ll start to feel better.
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For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.