Between October and December, Gross Domestic Product (GDP) rose by just 0.1% on the previous quarter as ITV News’ Business and Economics Editor Joel Hills explains.
2024 ended with a flicker.
The economy grew by 0.4% in December. That’s much stronger than many had predicted.
Activity shot up as pub, bars and retailers enjoyed a good Christmas and manufacturing rebounded.
In one sense, this feels like a result.
Only last week, the Bank of England’s forecast had the UK balanced precariously on the edge of a technical recession.
But don’t get carried away by a single month’s data – the big economic picture is one of torpor and weakness.
Between October and December, Gross Domestic Product (GDP) rose by just 0.1% on the previous quarter.
In 2024, the economy expanded by 0.9% – that’s unheroic and far below the 2.5% annual growth rate the government is targeting.
And when it comes to living standards, it’s what’s happening to GDP per Head (which divides UK GDP by the total UK population) that really matters.
GDP per Head in the UK has fallen in both of the quarters since Labour came to power in July last year – a Standard Of Living recession of sorts – and is lower now (£9,218) than it was at the end of 2019, just before the start of the pandemic (£9,316).
One reason the UK economy grew in 2024 is the number of people living and working here increased but growing an economy by growing the population doesn’t necessarily leave the average person better off.
“The UK is not alone in experiencing a living standards downturn – GDP per Head is also below even-of-pandemic levels in Germany and Canada,” notes the Resolution Foundation.
The government has pinned its fortunes to ensuring that voters in every part of the UK feel materially more prosperous before the next election.
The chancellor has announced a series of measures designed to revive economic activity, from planning and pension reform to airport expansion and greater public investment.
“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,” Rachel Reeves said this morning.
The impact of the chancellor’s policies will take time to be felt.
In the meantime, there are power forces acting a brake on economic activity.
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Interest rates are high – set at a level designed discourage spending in order to bear down on inflation; taxes will rise significantly for businesses in April as a result of the decisions the chancellor made in her Budget; Donald Trump is threatening a blizzard of tariffs on US imports, kicking-up intense levels of uncertainty.
Pay in the UK is rising faster than prices, government spending should be a source of growth in the months ahead.
There are reasons to feel hopeful but there’s a raft of survey data to suggest the feel-good factor isn’t there.
Households and companies seem low on confidence. Business investment fell at the end of last year and consumer spending flat-lined. Energy prices have edged up again.
For a meaningful pickup in living-standards we need economic growth to start burning brightly rather than repeatedly flickering slightly above and below zero.
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