Image source, Getty Images
- author, Michael Reese
- Role, Business correspondent, BBC News
The economy grew by more than initially estimated in the first three months of 2024 as the UK emerges from recession, revised official figures showed.
The Office for National Statistics said that between January and March, the economy grew by 0.7%.
Figures released last month indicated that growth initially reached 0.6%.
The strength of the economy has been a key battleground in the general election campaign, as growth has been sluggish in recent years.
Most economists, politicians, and business people want to see GDP rise steadily, because this usually means that people spend more, more jobs are created, more taxes are paid to the government, and workers get better wage increases.
The Office for National Statistics said the original figure for the first quarter of the year was stronger than economists had expected, with growth in the services sector, which includes firms such as hairdressers, banks and hospitality, helping to push it higher.
But while growth in services was revised upward, increases in manufacturing were revised downward on the back of more data collection.
Thanks to the upward revision, the UK became the fastest growing economy in the Group of Seven advanced economies in the first three months of this year.
Prime Minister and Conservative leader Rishi Sunak praised the new revised growth and said his party had a “clear plan to deliver a safer future for your family”.
But Labor accused the Conservatives of “14 years of economic sabotage”, which it said had left people worse off.
A government spokesman said: “A Labour government will grow the economy and show that Britain is open for business with a plan for growth, so we can put money back into people’s pockets.”
Sarah Olney, a Liberal Democrat Treasury spokeswoman, said that despite the upward revision, the figures “come as cold comfort to families struggling with soaring mortgage repayments, unfair taxation and the cost of a weekly grocery shop going through the roof”.
Paul Dales, chief UK economist at research firm Capital Economics, said faster GDP growth in early 2024 was “mainly due to upward revisions to consumer spending”.
The National Statistics Authority said spending increased on leisure and culture, as well as housing and food, but added that household disposable incomes continued to rise in early 2024 as workers received pay rises.
This means household savings rates rose from 10.2% at the end of last year to 11.1%, the highest rate since mid-2021 when savings were boosted during the Covid pandemic, Dales said.
He added that the new figure indicates that “whoever is prime minister this time next week may benefit from an economic recovery that has become a little stronger.”
“It’s the smallest sliver of improvement, but when it comes to UK GDP growth, every little thing really helps,” said Danny Hewson, head of financial analysis at AJ Bell.
“Growth has been front and center in the parties’ platforms, even if they differ on the details of how that growth is achieved. A growing economy creates wealth, puts more money in people’s pockets, and increases the amount of taxes delivered to depleted treasury coffers.”
While the UK has emerged from the economic recession it entered in the final months of 2023, many households may not be feeling much better off, with budgets under pressure due to recent price rises.
Interest rates are currently at a 16-year high of 5.25%, meaning people are paying more to borrow money for things like mortgages and loans, although savers are also getting better returns.
The latest figures on the economy show it failed to grow in April after particularly wet weather kept shoppers away from buying and slowed the pace of construction.
The Bank of England, which sets interest rates, has opened the door to cutting them in August, in what would be the first drop in borrowing costs in more than four years.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said that while “hotter than expected growth does not help those looking for a quicker route to lower interest rates, it does help boost overall optimism.”
“The UK’s deep-rooted productivity problems are generally of greater concern than the outlook for immediate interest rates,” she added.