UK Economy Surprises with GDP Growth, but Economic Challenges Remain, Per Capita Output Declines

UK Economy Surprises with GDP Growth, but Economic Challenges Remain, Per Capita Output Declines

London, February 13, 2025: The UK's economy unexpectedly grew by 0.1% in the final quarter of 2024, according to official statistics released on Thursday, providing some relief for Finance Minister Rachel Reeves amidst an otherwise bleak economic outlook. However, long-term challenges persist.

Economists surveyed by Reuters had forecast that the UK's Gross Domestic Product (GDP) would shrink by 0.1% in the period, but the quarter was boosted by a stronger-than-expected growth of 0.4% in December. For 2024 as a whole, GDP grew by 0.9%, compared to 0.4% growth in 2023.

However, when adjusted for population growth, output per capita fell by 0.1% last year, signaling ongoing pressure on living standards and public finances.

Following the release of the data, the pound strengthened slightly, rising by 0.3% against the US dollar, although government bond yields remained little changed.

Scott Gardner, an investment strategist at Nutmeg, commented, "It's a pleasant surprise, but we are not out of the woods yet. Beneath the surface of these figures, domestic demand through consumption and business investment was weaker than expected."

The UK was the best-performing major European economy in the fourth quarter, with Germany and France shrinking and Italy stagnant, but it lagged behind the United States' 0.6% growth.

The growth in December was driven by a strong performance in the UK's large services sector, which included wholesaling, film distribution, pubs and bars, as well as machinery manufacturers and pharmaceutical companies, according to the Office for National Statistics (ONS).