Britain Exits Recession as Economy Grows by 0.6%

Britain Exits Recession as Economy Grows by 0.6%
credit: independent

London (Parliament News) – Britain emerges from recession as economy grows by 0.6% in Q1, marking a return to transition. Stronger growth than expected was driven by the services sector, but challenges remain amid predictions of slow recovery.

Britain is officially out of recession after stats showed the economy expanded by 0.6% in the first three months of the year.

What Drove the 0.6% Growth in UK Economy?

The Office for National Statistics (ONS) stated the period from January to the end of March marked a return to transition after a mild recession in the second half of 2023. It was the most powerful rate of quarterly growth since the end of 2021 and a better version than expected by economists, who predicted growth of 0.4% in the first quarter.

The downturn came to an end after an expansion in activity across the services sector, which has grown since the turn of the year as wages have outstripped inflation, reducing the pressure on consumers. However, forecasters predict the UK to grow slowly this year as increased interest rates and last year’s inflation surge persist to take their toll on disposable incomes.

Why Did Bank of England Keep Interest Rates Steady?

The Bank of England has foreshadowed that a lack of momentum in the economy represents gross domestic product (GDP) will increase by only 0.5% this year. The Bank kept interest rates untouched at 5.25% on Thursday but suggested it may begin cutting them in June.

The chancellor, Jeremy Hunt, stated: “There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic.” He stated the UK had the best perspective among European G7 countries over the next six years, “with wages rising faster than inflation, energy prices falling and tax cuts worth £900 to the middle worker hitting bank accounts”. Although, apart from Germany, other eurozone countries avoided a recession last year.

What Predictions Do Forecasters Have for UK’s Growth?

The Organisation for Economic Co-operation and Development stated last week that the UK would be the poorest performing economy in the G7 next year, as high interest rates and the lingering impacts of last year’s surge in inflation drag on growth.

Reacting to the first-quarter GDP numbers, the shadow chancellor, Rachel Reeves, expressed it was a case of going “from no increase to low growth”. She said: “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good. The economy is still £300 smaller per person than when Rishi Sunak became prime minister.”

The ONS stated consumer spending and business investment rebounded in the first quarter after declines across the second half of 2023.

Liz McKeown, an ONS director of economic statistics, stated: “After two-quarters of contraction, the UK economy returned to positive growth in the first three months of this year. “There was broad-based strength across the service industries, with retail, public transport and haulage, and health all performing well. Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.”

Federica Calabrò

Federica Calabrò is a journalist at Parliament News, She is covering Business and General World News. She is a native of Naples, commenced her career as a teller at Poste Italiane before following her passion for dance. Graduating in classical dance, she showcased her talents with two entertainment companies, enchanting audiences throughout Italy. Presently, Federica serves as the general secretary at the Allianz Bank Financial Advisors financial promotion center in Naples. In this capacity, she manages office forms, provides document assistance for Financial Advisors, oversees paperwork for the back office, and ensures smooth customer reception and assistance at the front office. Outside her professional obligations, Federica indulges in her passion for writing in her leisure time.