UK economy exits recession on Q1 GDP growth

UK’s gross domestic product grew by 0.6% between January and March.

The UK has exited a short-lived technical recession after official figures showed better-than-expected growth in the first quarter.

GDP increased by 0.6% between January and March, according to data from the Office for National Statistics (ONS), beating some economists’ expectations of a 0.4% lift.

The rise – an estimate and subject to revision – is the fastest quarterly growth for the UK economy since December 2021.

The UK entered a technical recession in February after GDP fell by an estimated 0.1% in the third quarter of 2023 and 0.3% in the fourth quarter.

Recession is defined by the economy suffering two consecutive quarters of negative growth in its GDP, though many experts say a broader range of factors should be considered.

Across the UK economy, 13 of 20 subsectors experienced growth between January and March, compared with just six in the fourth quarter of 2023, the ONS said.

The services sector was the main contributor to GDP, growing by 0.7% over the quarter; the production sector also grew, by 0.8%. Increases in household spending, government spending and net trade also contributed.

The news was welcomed by prime minister Rishi Sunak, whose Conservative government is trailing Labour in polls ahead of the general election.

‘These growth figures show the economy has turned a corner,’ he said in a statement.

Danni Hewson, head of financial analysis at AJ Bell, said the GDP rise would boost the economy but could raise concerns about the UK’s inflation pattern.

‘After months of floundering around a flatline, growth of 0.6% will give the UK economy a real confidence boost,’ she said.

‘[Bank of England governor] Andrew Bailey painted a bucolic picture of a recovering economy, which will be further boosted by any rate cut tailwinds. But the resilience demonstrated by most sectors could be seen as a reason for [Bank of England monetary policy committee members] to keep their finger on the pause button [on rate cuts] for a little while longer.’

He added: ‘We’ve not yet seen the impact of the cut to national insurance or the increase in the national minimum wage on consumer spending patterns. Plenty of businesses have made it crystal clear that increased wage costs would have to be passed on.’

The Bank of England kept its bank rate at 5.25% yesterday for the sixth time in a row, though Bailey said there was cause for optimism around inflation.

Nicola Blackburn (CityWire)


Retirement ProfessionalsUK economy exits recession on Q1 GDP growth