UK GDP Growth Marks Slow Recovery From Technical Recession

Geopolitical tensions and industrial action in Britain have contributed to negative growth in several sectors of the economy.
UK GDP Growth Marks Slow Recovery From Technical Recession
Chancellor Jeremy Hunt leaves Downing Street with the despatch box to present his spring budget to parliament in London on March 15, 2023. Dan Kitwood/Getty Images
Evgenia Filimianova
Updated:
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Economic growth in January has marked a sluggish recovery from the technical recession the UK had entered at the end of last year.

Monthly GDP grew by 0.2 percent in January, following a 0.1 percent drop in December 2023, official figures showed. Chancellor Jeremy Hunt welcomed the GDP data, published by the Office of National Statistics.
“The last few years have been tough, but today’s figures show that with inflation more than halved, we’re now making progress in growing the economy,” he said on social media platform X.

While the Treasury focused on lowering the stubbornly high inflation rate in the past two years, it struggled to boost GDP growth. After two consecutive months of negative growth at the end 2023, the UK entered a technical recession.

“Over the past three months as a whole, the economy contracted slightly,” said Liz McKeown, director of economic statistics at the ONS.

Among the sectors driving the GDP growth down in the last quarter of 2023 were services, production and construction output.

January data showed that services output grew by 0.2 percent and was the largest contributor to GDP growth. Construction output also marked a positive growth trend of 1.1 percent, while production sector fell by 0.2 percent.

Looking at the three months to January, however, both construction and production fell by 0.9 and 0.2 percent respectively, while services showed no growth. Weak growth in the education and wholesale and retail trade also contributed to the negative trend in the three months to January.

The ONS said that these falls were offset by 0.8 percent growth in sectors such as professional, scientific and technical activities.

The stand-alone month of January showed growth in wholesale and retail trade, as well as repair of motor vehicles. Human health activities grew by 0.9 percent in January, while education was also on the rise, up by 0.7 percent.

Cross-Industry Themes

According to business survey data, presented by the ONS, some industries felt the impact of global developments, including the supply chain disruption in the Red Sea.
As a result of unprecedented attacks by the Iran-backed Houthi rebels on ships in the region, the impact has been felt by specialist chemicals firms and machinery and equipment manufacturers.

A range of manufacturing industries, including the manufacture of textiles, rubber and plastic products, food products and electrical equipment, have cited the conflict in the Middle East as the main reason for global supply chain disruption in January.

The NHS and the rail sector, affected by industrial action in the first month of the year, may have also negatively impacted output.

Rebound

On Tuesday, the ONS reported that real regular wages rose by 2 percent in January. The labour market figures also showed a rise in the number of payrolled employees–an increase by 386,000 (1.3 percent) in the year to January.
Pensions and Work Secretary Mel Stride said that the “encouraging” ONS data showed the government’s plan “is working.”
Mr. Hunt added that Britons are also set to benefit from a boost to take home pay after 2p cut in national insurance, announced in the Spring Budget. As a result of the cuts, average workers will be able to pocket £900 a year, said the chancellor.
Reacting to GDP growth markers, chief UK economist for Pantheon Macroeconomics, Rob Wood said the GDP was on track for strong rebound in the first quarter.
He estimated that GDP could grow by 0.3 percent in the first three months of the year. Mr. Wood expects the Bank of England (BoE) to announce the first cut to interest rates in June.
The BoE has previously said it needs more evidence that inflation will fall further sustainably before interest rates could be lowered. The bank expects inflation to hit its 2 percent target in the second quarter, before increasing again in subsequent quarters.
PA contributed to this report.
Evgenia Filimianova
Evgenia Filimianova
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Evgenia Filimianova is a UK-based journalist covering a wide range of national stories, with a particular interest in UK politics, parliamentary proceedings and socioeconomic issues.
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