The UK economy showed unexpected growth in the final quarter of 2024, with the Office for National Statistics (ONS) reporting a 0.1% rise in gross domestic product (GDP).
This slight increase was primarily driven by a recovery in Christmas spending and manufacturing in December 2024, defying economist predictions of a 0.1% contraction.
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Despite this growth, the risk of a shallow recession remains due to the narrow margin between contraction and growth, reported Sky News.
Future data revisions could potentially alter the current balance.
Across 2024, the total GDP grew by 0.9%, but GDP per capita contracted for two consecutive quarters, highlighting ongoing pressure on living standards.
The UK Government faces significant pressure as it prioritises economic growth. Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves faced criticism last year for warning of a tough budget to address public finances.
October’s measures aimed to protect working people, but companies argue that increased employer National Insurance contributions from April could impact investment, jobs, and wages.
Inflation is rising, with essential costs such as water, energy, and council tax expected to increase sharply in the upcoming months.
Global growth challenges are also present, with US President Donald Trump’s election victory leading to potential universal trade tariffs.
The Bank of England’s new projections indicate inflation could reach 3.7% this year, up from 2.5%, with growth forecasted at 0.75% for 2025, down from previous expectations.
Chancellor Rachel Reeves faces challenges as limited growth impacts potential tax receipts, adding strain to her budget rules over public finances.
Commenting on the ONS data, Reeves said: “For too long, politicians have accepted an economy that has failed working people. I will not. After 14 years of flatlining living standards, we are going further and faster through our Plan for Change to put more money in people’s pockets.
“That is why we are taking on the blockers to get Britain building again, investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand.”
