The UK economy showed signs of resilience by growing by 0.6% in the second quarter of 2024, in line with economists’ expectations. This growth follows a strong 0.7% increase in the first quarter, indicating a recovery after a shallow recession in the second half of 2023.
The Office for National Statistics released data on Thursday showing that UK gross domestic product (GDP) remained flat in June, in line with expectations of economists polled by Reuters. Compared with the same month last year, GDP rose by 0.7%.
Suren Thiru, Director of Economics at the Institute of Chartered Accountants in England and Wales, commented:
Thiroux also expressed concern that economic growth could slow in the second half of 2024 due to continued high interest rates, supply constraints and slowing wage growth despite the Bank of England’s recent interest rate cut.
The Bank of England had previously revised its annual growth forecast for 2024 up from 0.5% to 1.25%, citing a stronger-than-expected start to the year. It also forecast growth of 0.7% in the second quarter. However, the bank’s forecast for the rest of the year is less optimistic, with growth expected to slow to 0.4% in the third quarter and 0.2% in the final quarter, which is thought to be closer to the economy’s underlying growth rate.
Since the Covid-19 pandemic, the UK economy has grown by just 2.3% from the fourth quarter of 2019 to the second quarter of 2024, and only Germany among the world’s largest advanced economies has performed significantly worse over that period, largely due to the global financial crisis and the impact of rising energy costs following Russia’s invasion of Ukraine.
Prime Minister Keir Starmer has set an ambitious target for the UK economy to grow at an annual rate of 2.5%, a target the country has not consistently achieved since before the financial crisis of 4 July 2008, and the target has been highlighted. Chancellor Rachel Reeves has set an official target for the UK to lead the Group of Seven advanced economies in GDP per capita growth for two consecutive years.
Despite those ambitions, data on Thursday showed that per capita output in the second quarter of 2024 was 0.1% below a year earlier and 0.8% below pre-pandemic levels. Reeves said the latest figures highlighted the challenges facing the new government and reiterated his position that tough decisions were needed to shore up economic fundamentals.
Growth in output per hour worked in the UK has been slow, a trend common to most advanced economies since the late 2000s, and a limiting factor in improving living standards. This has been exacerbated by domestic issues such as low business investment and the public’s decision to leave the European Union in 2016.
Reuters contributed to this article.
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