The United Kingdom has officially exited recession. The country’s GDP grew by 0.4% in March, which followed a 0.2% rise in February, with growth in the first quarter of 0.6%, beating economists’ predictions.
In what will come as welcome news for UK Prime Minister Rishi Sunak and his Conservative Party, the UK has officially exited recession. The unexpected growth numbers were helped by services output growing 0.5% month-on-month and production growing 0.2%. The UK’s GDP was expected to rise 0.1% month-on-month and 0.4% in the quarter (Trading Economics).
The UK will hold a general election at some point in the not-too-distant future, and if some political commentators are to be believed, the chances of the Conservative Party winning have waned. However, the better-than-expected numbers, the Government’s push-back against the W.H.O treaty, and the possibility of leaving the ECHR will give some much-needed confidence to many undecided voters.
It was announced that the UK had officially entered recession in February, which is defined as two consecutive three-month periods where an economy contracts. The reasons for the contraction, put forward by some economists, were the months of wet weather, high inflation, and the rise in energy bills.
On the UK exiting recession, Nicholas Hyett, Investment Manager at Wealth Club, said, “An upgrade to February’s growth estimate and strong performance in March means the 2023 recession is rapidly receding in the rearview mirror – ending almost as soon as it had started.
Not only is the UK back in the black, but the economy is growing faster than expected. Perhaps most reassuring is the broad base of growth – with positive developments across everything from retail to manufacturing.
Construction remains the one area of weakness, particularly in the commercial sector. That’s no surprise. Real estate is particularly exposed to the effect of higher interest rates, and the upheaval of the pandemic is still rocking the office and retail sector – with increased home working and online shopping permanently changing demand. That’s not a trend that’s unique to the UK.
The Bank of England will be particularly pleased with itself looking at these numbers. With the economy looking healthy, a rate cut on Thursday would be looking premature now.”
Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs, said, “The 0.6% bounce in GDP in the first quarter of the year means that the UK economy has officially exited recession, which should boost consumer and business confidence and prompt a wave of upward revisions to forecasts for 2024.
“Nonetheless, the numbers are still little to get excited about. The first quarter figures were flattered by a big boost from net trade, as imports fell by more than exports, and by the favourable comparison with the weak figures in the second half of last year. Consumer spending only grew by 0.2%. GDP per capita rose by 0.4% but remains 0.7% lower than a year earlier.
“Growth should continue over the rest of the year, albeit at a slower pace. Inflation is set to fall further and the slightly better GDP figures for the first quarter are unlikely to deflect the Bank of England from cutting rates. The business surveys that signalled a decent bounce in the first quarter were still strong at the start of the second.
“But the UK economy is still grappling with big problems. An even bigger state – with higher spending, higher taxes and more intervention – is not the solution.”
You must be logged in to post a comment.