Image source, Getty Images
- Author, Michael Race
- Role, Business reporter, BBC News
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Revised official figures show that the economy grew more than originally estimated in the first three months of 2024, when Britain emerged from recession.
The economy grew by 0.7 percent between January and March, the Office for National Statistics (ONS) said.
Figures published last month initially assumed growth of 0.6 percent.
The strength of the economy was a central issue in the election campaign after growth had been sluggish in recent years.
Most economists, politicians and businesses want to see steady GDP growth because it usually means people spend more, more jobs are created, more taxes are paid to the government and workers get better pay increases.
The initial figures for the first quarter of the year were better than economists expected. The increase was helped by growth in the services sector, which includes companies such as hairdressers, banks and the hospitality industry, according to the ONS.
However, while growth in the services sector was revised upwards, growth in the manufacturing sector was revised downwards due to the collection of additional data.
The upward revision made the UK the fastest-growing economy in the G7 group of countries with advanced economies in the first three months of this year.
Prime Minister and Conservative leader Rishi Sunak welcomed the new growth targets, saying his party had a “clear plan to give your family a more secure future”.
But Labour accused the Conservatives of “14 years of economic vandalism” that had left people worse off.
“A Labour government will drive economic growth and have a growth plan to show that Britain is open for business so we can put money back in people’s pockets,” a spokesman said.
Sarah Olney, Liberal Democrat Treasury spokeswoman, said that despite the upward revision, the figures were “little consolation for families suffering from rising mortgage payments, unfair hidden taxes and skyrocketing costs of a weekly grocery shop”.
Paul Dales, chief UK economist at research firm Capital Economics, said the faster rise in GDP in early 2024 was “mainly due to upward revisions to consumer spending”.
The ONS said spending on leisure and culture, as well as housing and food, had increased, but added that household disposable income continued to rise in early 2024 as workers received pay rises.
According to Dales, this has led to an increase in the household savings rate from 10.2 percent at the end of last year to 11.1 percent, the highest since mid-2021, when savings were boosted during the Covid pandemic.
He added that the new figure suggested that “whoever is prime minister this time next week could benefit from a somewhat stronger economic recovery.”
“It’s only a tiny improvement, but when it comes to UK gross domestic product growth, every little bit really helps,” said Danni Hewson, head of financial analysis at AJ Bell.
“Growth has been at the heart of the party manifestos, even if the parties have different views on how to achieve this growth. A growing economy creates prosperity, puts more money in people’s pockets and increases tax revenues for depleted state coffers.”
While the UK has emerged from the economic recession it fell into in the final months of 2023, many households may not be doing better as their budgets have been strained by rising prices recently.
At 5.25 percent, interest rates are currently at their highest level in 16 years. This means that people have to pay more for credit such as mortgages and loans, although savers have also received better returns.
Latest economic figures show that there was no economic growth in April as particularly wet weather deterred buyers and slowed construction activity.
The Bank of England, which sets the base interest rate, has raised the possibility of cutting the base rate in August, which would mark the first decline in borrowing costs in over four years.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, said that while “stronger-than-expected growth does not help those looking for a faster route to lower interest rates, it does increase general optimism.”
“The UK’s deep-rooted productivity problems are a greater concern overall than immediate interest rate developments,” she added.