April 12, 2024, 07:21 BST
Updated 2 minutes ago
image source, Getty Images
The British economy grew slightly in February, giving hope that it is on the way out of recession.
According to official figures, the economy grew by 0.1%, boosted by production and manufacturing in areas such as the automotive industry.
However, the Office for National Statistics (ONS) said construction work was dampened by wet weather.
This is an early estimate, but it shows how the UK is doing, having entered a recession at the end of 2023.
Liz McKeown, director of economic statistics at the ONS, said the economy grew over the full three months to February for the first time since last summer.
“Go around a corner”
Chancellor Jeremy Hunt said the new figures were a “welcome sign that the economy is turning a corner”.
“We can build on this progress if we stick to our plan,” he added.
Growing the economy was one of the top five promises made by Prime Minister Rishi Sunak last year as consumers and businesses came under pressure from higher prices and interest rates.
However, Labor shadow chancellor Rachel Reeves argued that “Britain is worse off with low growth and high taxes”.
She added: “The Conservatives can't fix the economy because they are the reason it's broken.”
Most economists, politicians, and businesses would like to see an overall steady increase in gross domestic product (GDP), as this typically means people spending more, additional jobs being created, more taxes being paid, and workers getting better wage increases.
The official statistics office also revised its previous estimate of gross domestic product (GDP) to 0.3% from 0.2% in January.
In February, UK manufacturing output led the economy with a rise of 1.1%, compared to a fall of 0.3% in January.
However, production in the construction sector fell 1.9% as persistent rain hampered construction projects.
The services sector, which includes hairdressing and hospitality businesses, also saw slight growth, with public transport and trucking having a strong month.
Yael Selfin, chief economist at KPMG UK, said February's overall numbers were a strong signal that the recession, defined as when an economy contracts for two three-month periods in a row, may already be over.
Growth is likely to have been boosted by social security cuts and slower price increases, meaning businesses and households will have more confidence in their finances and therefore their spending.
However, she added that consumer spending was still fragile and business investment could be hit by uncertainty surrounding the general election.
image description, Andrew Watson says the metal fabrication company he works for has seen overall growth
Andrew Watson is chief financial officer at Goodfellow, a Cambridge-based metals manufacturer that conducts research and development worldwide.
He said the company was hit by disruptions from attacks on shipping vessels in the Red Sea last year and that supply chains were strained after the pandemic, “but overall we have seen growth.”
“There's this weird mix of the economy not doing so well as a GDP measure, and yet we feel like we have opportunities for growth – and we just need to move forward and take advantage of those opportunities,” he said.
He noted that growth in the United Kingdom since the coronavirus crisis has been “anaemic” and that there are more opportunities in the United States.
Other countries' economies have also faced energy price shocks and supply chain delays as the pandemic pushed up costs, as well as the potential knock-on effects of conflicts abroad, but in the UK growth has been stagnant for some time.
“Industries are still struggling”
Dr. Roger Barker, director of policy at the Institute of Directors, pointed out that there were few signs of a “strong” economic recovery in the UK and that some parts of the service industry such as hotels and hospitality were still struggling.
Other economists pointed out that the impact of previous interest rate hikes by the Bank of England was still ripping through the economy.
Currently, experts are divided over when the UK central bank might start cutting interest rates in the summer, potentially bringing some relief to mortgage holders and borrowers.
The bank's monetary policy committee considers a range of economic data when deciding on the key interest rate, although monthly numbers like February's can be quite volatile and are “unlikely” to lead to a big change in its thinking, said Danni Hewson, head of financial analysis at AJ Bell.
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