UK exits recession with better-than-expected GDP growth

Britain’s economy grew by the most in nearly in three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to prime minister Rishi Sunak ahead of an election.

The Office for National Statistics said gross domestic product expanded by 0.6 per cent in the three months to March, the strongest expansion since the fourth quarter of 2021 when it grew by 1.5 per cent.

A Reuters poll of economists had pointed to a 0.4 per cent expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3 per cent in the final quarter of 2023.

The economy had suffered two successive quarters of contraction in the second half of last year, meeting the technical definition of a recession on the back of elevated inflation and a cost-of-living crisis.

Friday’s data will be welcome news for Sunak who said the economy had “turned a corner”, although the opposition Labour Party, which has a large lead in opinion polls, has accused Sunak and chancellor Jeremy Hunt of being out of touch to think voters are feeling better off.

“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,” Hunt said.

“We’re growing this year and have the best outlook among European G7 countries over the next six years,” he added.

The Bank of England, which held interest rates at a 16-year high on Thursday, forecast quarterly growth of 0.4 per cent for the first quarter of this year and a smaller 0.2 per cent rise for the second quarter.

On a monthly basis, the economy grew by 0.4 per cent in March, faster than the 0.1 per cent growth forecast by economists in a Reuters poll.

“There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well,” said ONS director of economic statistics Liz McKeown.

“Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.”

Britain remains one of the slowest countries to recover from the effects of the coronavirus pandemic.

At the end of the first quarter of 2024, the country’s economy was just 1.7 per cent bigger than its level in late 2019, before the pandemic, with only Germany among the G7 faring worse.

GDP had shrunk by 0.3 percent in the fourth quarter of 2023 after contracting by 0.1 percent in the prior three months.