UK Economy Grows But Morale Lags

In November 2024, the British economy grew by 0.1% for the first time in three months, according to data from the Office for National Statistics. This modest growth was fuelled by the services and construction sectors, with construction rebounding by 0.4% after a 0.3% decline in October. However, while any growth is welcome, the result fell short of the expected 0.2%.

The growth has done little to instill confidence in the future of the economy and the new government. With tax increases set to take effect in April, businesses have repeatedly cautioned that rising costs—coupled with higher minimum wages and reduced business rates relief—could hinder the economy's growth. Employers are bracing for tighter budgets, expecting less room to offer pay rises or create new jobs. 

Chancellor Rachel Reeves, who has been under increased scrutiny, admitted that the government has to “do more to grow our economy”. These figures provide the first glimpse of how her inaugural budget has been received, and concerns persist that economic growth is unlikely to improve in the near future. Such data is crucial for the government, which is under growing pressure after making economic growth its top priority.

Prices are set to rise in April with increases in water and electricity bills, alongside higher employer taxes, fuelling expectations of a surge in inflation. With additional cost pressures on consumers, concerns are growing that economic growth could become even more elusive. This has led to fears of a potential stagflation period ahead.

However, growth takes time, and Reeves pointed out that they inherited a British economy that had “barely grown” for the last 14 years.