UK Economy on the Road to Recovery in 2024 Following the Mild Recession

Main points

• Monthly GDP grew by 0.2 per cent in January, following a contraction of 0.1 per cent in December. This monthly figure was mainly driven by increasing output in construction and services, particularly retail and wholesaling
• GDP contracted by 0.1 per cent in the three months to January relative to the previous three-month period, in line with our previous forecast. This was generated by an output fall in construction and production
• We forecast GDP to grow by 0.3 per cent in the first quarter of 2024. This forecast remains broadly consistent with the longer-term trend of low, but stable economic growth in the United Kingdom (Figure 1)
• As we noted in our response to last week’s Spring Budget, the measures implemented in the relatively low-key budget are unlikely to unlock the UK’s growth and productivity problems. To escape the low-growth trap, structural changes are needed, such as an increase in public investment, particularly in infrastructure, education and health – which would also support growth in business investment

"Today’s ONS data indicate that monthly GDP grew by 0.2 per cent in January 2024, following a fall of 0.1 per cent in December 2023. While this seems positive, GDP fell by 0.1 per cent in the three months to January, in line with our forecast last month. In broader terms, UK economic growth has been near-zero since 2022 and GDP per head remains lower than pre-Covid. To escape the low-growth trap, structural changes are needed, such as an increase in public investment, particularly in infrastructure, education and health – which would also support growth in business investment."

Paula Bejarano Carbo

Economist, NIESR