UK economy just about returns to growth after two months of contraction

The UK economy just about returned to growth in November after two months of contraction, the latest official figures show.

Gross domestic product (GDP), the standard measure of an economy’s value and everything it produces, grew by 0.1%, according to data from the Office for National Statistics.

It was expected to grow by 0.2%.

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It is mixed news for the government, which has made economic growth its top priority.

 

Despite this political focus, the economy shrank by 0.1% in both October and September. Latest quarterly data showed there was no economic growth in the three months from July to September.

The ONS described the economy as “broadly flat” and the rise as the economy growing “slightly”.

What parts of the economy are growing and which aren’t?

Doing well are pubs, restaurants and IT companies, said the ONS’s director of economic statistics Liz McKeown.

New commercial developments meant there was growth in the construction industry, Ms McKeown added.

The services sector grew “a little” but all this was partially offset by the accountancy sector and business rental and leasing.

Also pushing down the growth rate were manufacturing businesses and oil and gas extractors.

Why does it matter?

The government has pegged many of its spending and investment plans on economic growth. It needs growth to meet its political pledges and spending commitments.

But the economy is no bigger now than when the government assumed office in July.

Prices are expected to rise in April when water and electricity bills are increased again and employer taxes go up meaning there’s an expectation of inflation increases.

With more cost pressures on consumers, there are fears growth could be even more illusive than at present. A period of stagflation is feared at that point.

Chancellor Rachel Reeves admitted to Sky News the economy was growing “albeit modestly”.

When pointed to the idea growth has been snuffed out since Labour came to power Ms Reeves said the truth is the British economy had “barely grown” for the last 14 years.

Growth “takes time” and with investment and reform, she’s “confident we can build our economy and make people better off”.