Economy shows surprise growth at end of 2024 – but living standards hit
The UK economy grew fractionally during the final three months of 2024, according to early official figures, which ease the immediate risk of a recession.
The Office for National Statistics (ONS) reported a 0.1% rise in gross domestic product (GDP) during the fourth quarter, with only a recovery for growth in services and manufacturing during December coming to the rescue.
Economists had been largely expecting a contraction of 0.1% for the three month period following a zero growth reading for the previous three months to September.
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The risk of shallow recession is still there, however, because the margins between contraction and growth are so tight in the data that likely future revisions may tip the balance either way.
The wider ONS figures showed that across 2024 as a whole, total GDP grew by 0.9%.
But a closely-watched measure for living standards in the economy, GDP by head of population, showed a contraction for two consecutive quarters.
The figures maintain intense pressure on the government as it has made achieving economic growth its priority for the parliament.
Its term did not begin in a way that would bolster business and consumer confidence.
Analysis: Why relief over economy may be temporary
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Starmer defends handling of economy
Prime minister Sir Keir Starmer and his chancellor were accused of an own goal last summer after warning of a tough budget ahead to bolster dire public finances.
While October’s measures were aimed at sparing pain from working people, companies argue that hikes to employer National Insurance contributions from April will knock investment, force job cuts, and impact pay rises.
Why relief over economy in Downing Street may be temporary
Yes there are all sorts of provisos. The UK economy is still flatlining. A 0.1% expansion, in one key measure, is about as close as you can get to zero.
Gross domestic product per head – a better measure of our living standards – is shrinking (indeed, it’s been shrinking for two quarters). And the UK remains far weaker than the leading G7 economy – the United States.
But even after taking all that into account, it’s hard not to conclude that the chancellor will be celebrating today’s GDP figures. After all, economists had expected the economy to shrink by 0.1% rather than growing. Thanks to a late spurt in growth in December, it actually grew.
Moreover, up until today’s figures, the profile of economic growth in the UK was frankly pretty dismal. There was zero cumulative growth since last year’s election. Now, thanks to that jump in December – an unexpected late Christmas gift for the chancellor – cumulative growth since the election is now up to 0.4%.
Of course, none of this changes the bigger economic picture. The UK economy is still stuck in a rut. The enormous growth in migration in recent years means that, once you take account of the growing population, there is considerably less income floating around for every family than there was a few years ago.
And vast swathes of the UK economy are in desperate trouble. Most notably, the industrial sectors that used to power much of the country’s growth, are contracting at a rapid rate. That is not just a UK problem – indeed, it’s shared with much of Europe. In Germany, the economy has contracted for two successive years. This deindustrialisation is one of the most significant issues facing the continent.
And that’s before one considers a few other awkward issues: the real impact of last October’s budget have yet to be felt in the economy. The Office for Budget Responsibility is widely expected to slash its growth forecasts next month, which could prompt the chancellor to further trim spending in the coming years.
Then there are other, even more profound challenges. What happens if and when the US imposes far-reaching tariffs on UK imports? How will the UK afford the dramatic increases in defence spending the White House is demanding? Now, more than ever before, it’s quite plausible that outside events cause outsize impacts on the UK economy.
In short, while today’s numbers will be a relief in Downing Street, it’s not altogether clear how long that sense of relief will last.
That backdrop is made more painful by the fact that inflation is on the increase again, with a slew of essential bills including those for water, energy and council tax all set to rise sharply in the spring too.
At the same time as the domestic difficulties, global growth is also being challenged by Donald Trump who had threatened at the time of his election victory that universal trade tariffs were imminent.
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Bank governor on “depressing” growth outlook
New projections from the Bank of England last week made for sobering reading, with inflation expectations for this year hitting 3.7% from the current 2.5%.
Growth, the forecast suggested, would come in at 0.75% for 2025.
In November, the Bank had expected a figure double that sum.
A lack of growth is a problem for chancellor Rachel Reeves as it typically hits potential tax receipts at a time when her budget rules over the public finances are already under strain.
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It emerged on Wednesday that the Treasury had ordered a leak inquiry following a Bloomberg report that updated Office for Budget Responsibility forecasts sent to ministers had downgraded UK growth expectations.
Ms Reeves said of the ONS data: “For too long, politicians have accepted an economy that has failed working people. I won’t.
“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.”
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Shadow chancellor Mel Stride responded: “The chancellor promised the fastest-growing economy in the G7, but her budget is killing growth.
“Working people and businesses are already paying for her choices with ever-rocketing taxes, hundreds of thousands of job cuts and business confidence plummeting.
“It does not need to be this way.”
Sir Keir Starmer says he has full confidence in Rachel Reeves after questions were raised about inaccuracies in her CV and her use of expenses in a previous job.
The chancellor has been accused by former employees of being involved in an “expenses scandal” while working at Halifax Bank of Scotland (HBOS) from 2006 to 2009, according to the BBC.
She has also been accused of saying she worked for the Bank of England for longer than she did.
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The prime minister said the chancellor can be trusted and has no concerns about her conduct, Number 10 said.
Ms Reeves’ spokesperson said she was “not aware of an investigation, nor was she interviewed”. Her lawyer has denied the allegations.
One ex-colleague said she nearly got sacked after an investigation into three senior managers accused of “signing off each other’s expenses”.
This included spending hundreds of pounds on handbags, perfume, earrings and wine for colleagues, including one gift for her boss.
A whistleblower said there was also concern about her spending on taxis and on a Christmas party.
In a Facebook group of former HBOS employees seen by the BBC, several people referred to Ms Reeves being investigated over her expenses spending.
Pic: Reuters
Sir Keir’s official spokesman said it was “correct” the prime minister has “no concerns whatsoever” about the chancellor’s conduct and has confidence in her.
He also said: “I can’t speak to her time prior to government.
“The PM works hand in hand and has full faith in the chancellor.”
Sir Keir later said she has “dealt with any issues that arise” from questions about her career before becoming an MP.
Reeves lawyers deny wrongdoing
A spokesperson for Ms Reeves said: “Rachel is proud of the work she did at HBOS and the teams that she led, it is 16 years since she left the bank and the first time she was made aware of these claims was when approached by journalists.
“She was not aware of an investigation nor was she interviewed, and she did not face any disciplinary action on this or any other matters. All expenses were submitted and signed off in the proper way.
“Several former colleagues from her time at the bank, including HBOS’ former HR business partner, have corroborated this account.
“Rachel left HBOS in 2009 on good terms.”
Ms Reeves’s lawyer while she was leaving HBOS denied she had done anything wrong, saying she left HBOS with a “standard-style agreement” after a “mutually agreed exit was made during the bank’s restructure”.
David Sorensen, a managing partner at Morrish Solicitors, added: “My clear understanding at the time was that my client, who was in a senior role, left on good terms when HBOS plc was acquired in 2009, as evidenced by the payments made to her, the retention of her company car and other benefits for a six-month period, and a favourable reference.
“Absolutely no allegations of wrongdoing or misconduct were mentioned by the HBOS HR team during this process.”
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‘I am not satisfied with the level of growth’
LinkedIn dates questioned
Questions have also been raised about Ms Reeves’ online CV, as her LinkedIn profile said she stayed at the Bank of England nine months longer than she actually did, the BBC has reported.
She has publicly said she spent a decade there, but her LinkedIn profile claimed she worked at the bank from September 2000 to December 2006.
However, she is understood to have left by March 2006, when she started working at HBOS.
That means she spent five and a half years at the bank, including nearly a year studying.
Ms Reeves’ spokesman, in a comment given to the BBC, said the dates on her LinkedIn were inaccurate and blamed an administrative error by her team.
They said the chancellor had not seen it before it was published.
The chancellor’s LinkedIn profile has now been updated to reflect she left the bank in March 2006.
Ms Reeves has repeatedly said she spent 10 years at the Bank of England, citing her time as an economist there as why she can be trusted with the UK’s finances.
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