The UK economy grew marginally during the final three months of last year, easing – but not lifting – the risk of recession.
ONS figured reported a 0.1% rise in GDP, thanks to a late signs of recovery for growth in services and manufacturing.
As many economists had been predicting, it followed a period of zero growth over the previous three months, leaving a risk of shallow recession.
Kevin Fitzgerald, UK MD of Employment Hero said this showed the economy is “clearly reeling from the punitive National Insurance hike announced in October”, something causing significant concern for businesses across the country.
“While the Government is taking some positive steps to fuel growth, it has made a rod for its own back with this policy, while stripping small businesses of their confidence and capacity to invest in their teams.
“Our data from the 90,000 SME employees on our platform show that job and pay growth has remained flat since the announcement, and this is likely to worsen as we approach April, when the hike takes effect. If the Government truly wants to fuel growth, it needs to reconsider measures that actively undermine the ability of businesses to thrive.”
Belsham: it lurched on the last lap
Gareth Belsham, director of Bloom Building Consultancy, said the Construction industry “lurched rather than limped across the finish line” after flatlining in October, jumping in November and then shrinking in December.
“But for all the monthly volatility, momentum remains. In 2024 as a whole, the industry grew by 0.4% compared to 2023, chalking up a fourth consecutive year of expansion.
“However question marks linger about how resilient the growth is. More than half of the nine sub-sectors tracked by the official data contracted in December.
“Of far greater concern is the continued slowing of the new orders pipeline. The total value of orders placed in the final quarter slumped by 2.4% compared to the preceding three months. It now stands at the lowest level seen since the shutters came down on much of the UK economy during the first Covid lockdown of 2020.”
But there were some bright spots with commercial builders ending the year on a high. “The value of commercial orders placed in the final quarter was 15.1% higher than in the same period in 2023, and orders surged by 16% in 2024 as a whole,” he said.
“The industry has begun 2025 finely poised. The Chancellor is making all the right noises about construction being an engine of wider economic growth and the prospect of falling interest rates will make it easier for developers to buy land and get building.
“For all the momentum, business sentiment is patchy and developers, landlords and investors are laser-focused on value and proceeding with caution.”
Fitzgerald: NI changes left it reeling
Rob Morgan, Chief Investment Analyst at Charles Stanley, said the news “provides some rare relief” for Chancellor Rachel Reeves as the economy came “within a whisker” of recession.
“While not setting the world alight, the year-on-year figure for economic growth of 1.5% is respectable, given the challenges of higher inflation and interest rates.”
But he added: “It is not a time for victory laps certainly, and the danger of recession hasn’t gone away, but relative to expectations this is a win for the Chancellor. Concerns of a weak festive period did not transpire, and it offers something to build on this year.”
George Lagarias, Chief Economist at Forvis Mazars said: “December growth significantly surprising on the upside may be good news, but we wouldn’t pop the champagne just yet. The spectre of stagflation is very much alive. The upside came mainly from the service sector, and in particular professional services.
“However, the more forward-looking January PMI data on British services suggest that orders remain soft, corporate risk aversion high and employment conditions are deteriorating. While we can’t totally dismiss a good growth number, we don’t think that it alone will move the needle for the Bank of England which is on a dovish path.”
FSB national chair Martin McTague, said the “modest up-tick in growth” was far preferable to the alternative, but flat growth registered across the final quarter will not come as a surprise to many small firms.
“The fall in production in the last quarter shows that evidence of a feel-good factor from the end of last year is sadly lacking, with members telling us they are finding trading conditions difficult, to say the least.
“With tax changes coming up in April, and the looming Employment Rights Bill which is set to put a big dampener on small businesses’ willingness to take on staff, any economic uplift that has been carried over from last year will be a help, but more must be done to offset turbulence.
“The recent cut in the base rate is a good sign, but will not by itself be enough to give small businesses the confidence they need to choose to invest in their operations, which is what is needed for long-term, substantial and sustainable growth in GDP.”
