The United Kingdom's economy grew by 0.6% in the final quarter of 2024, according to official figures released on Thursday. This performance surpassed economists' expectations of a 0.4% increase, providing a boost to the government's economic narrative ahead of the upcoming budget.
Stronger-Than-Expected Growth
The Office for National Statistics reported that the gross domestic product expanded by 0.6% in the three months to December, compared to the previous quarter. This marks an acceleration from the 0.4% growth recorded in the third quarter. For the full year, the economy grew by 1.2%, a slowdown from 2.1% in 2023 but still within the range of official forecasts.
Services sector output, which dominates the UK economy, rose by 0.8% in the quarter, driven by growth in information and communication, as well as administrative services. Manufacturing output increased by 0.3%, while construction output fell by 0.2%.
Consumer Spending and Investment
Consumer spending remained resilient, rising by 0.7% in the quarter, supported by a strong labor market and wage growth. Business investment, however, declined by 0.5% amid uncertainty over trade relations and regulatory changes. Government spending also contributed positively, up by 0.4%.
Net trade was a drag on growth, with exports falling by 0.8% and imports rising by 0.6%. The trade deficit widened as a result.
Economic Outlook
The Bank of England has forecast that the economy will continue to grow at a modest pace in 2025, with GDP expected to expand by 1.5%. However, risks remain, including persistent inflation, higher interest rates, and global economic uncertainty. The government has emphasized its commitment to fiscal discipline while investing in infrastructure and green technologies to boost long-term growth.
Chancellor of the Exchequer, Rachel Reeves, welcomed the figures, stating: "These numbers show that our economy is turning a corner. We are laying the foundations for sustainable growth that benefits working people across the country." Shadow Chancellor Jeremy Hunt criticized the government's economic management, arguing that growth remains too low and that taxes are stifling investment.
Economists cautioned against overinterpreting the quarterly data, noting that the economy is still below its pre-pandemic trend. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The quarterly growth figure is encouraging, but the underlying picture is one of a sluggish economy constrained by weak productivity and high debt levels."
The GDP data comes ahead of the Spring Statement, where the government is expected to outline further measures to stimulate growth, including potential tax cuts and regulatory reforms.
