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Britain’s economic system is on monitor to benefit from the quickest development of any G7 nation within the first half of the yr, analysts say.
The Workplace for Nationwide Statistics stated gross home product (GDP) elevated by 0.6 per cent between April and June, according to economists’ predictions. This totals 1.3 per cent of development within the first six months of 2024, after Britain fell into recession in late 2023.
Though the figures predate the election, they may present a lift for the prime minister, Sir Keir Starmer, and chancellor Rachel Reeves, who’ve made development the federal government’s precedence, whereas warning of “powerful selections” forward, with some tax rises anticipated.
However specialists stated the identical stage of “gangbusters” development is unlikely to be sustained within the second half of the yr, and warned that the figures might persuade the Financial institution of England to delay additional reducing rates of interest.
In June, no financial development was recorded for the month as weak spot in providers was offset by enhancements within the manufacturing sector, the ONS stated.
April additionally noticed no development recorded, which was put right down to the affect of moist climate, however then Could noticed a 0.4 per cent enhance to the economic system.
ONS director of financial statistics Liz McKeown stated: “The UK economic system has now grown strongly for 2 quarters, following the weak spot we noticed within the second half of final yr.
“Development throughout the three months was led by the service sector, the place scientific analysis, the IT trade and authorized providers all did nicely.
“In June, development was flat with providers falling, as a result of a weak month for well being, retailing and wholesaling, offset by widespread development in manufacturing.”
Ms Reeves stated: “The brand new authorities is beneath no phantasm as to the dimensions of the problem now we have inherited after greater than a decade of low financial development and a £22bn black gap within the public funds.
“That’s the reason now we have made financial development our nationwide mission and we’re taking the powerful selections now to repair the foundations, so we will rebuild Britain and make each a part of the nation higher off.”
Within the first week after Labour’s election landslide, Ms Reeves promised to reboot the economic system by making it the brand new authorities’s “nationwide mission” to safe the very best sustained development within the G7.
Ms Reeves stated on the time: “Delivering financial development is our nationwide mission, and we don’t have a minute to waste.
“That’s the reason this week I’ve already taken the pressing motion needed to repair the foundations of our economic system to rebuild Britain and make each a part of Britain higher off. A decade of nationwide renewal has begun, and we’re simply getting began.”
Simon Pittaway, senior economist on the Decision Basis, stated that whereas the UK has recorded the strongest development of any G7 economic system over the previous six months, “that’s the place the excellent news ends”.
“Britain’s medium-term document is way much less spectacular, and has been pushed by a rising inhabitants reasonably than rising productiveness,” he stated. “With no return to productiveness development, residing requirements will proceed to stagnate and Britain will proceed to fall behind its friends.”
Suren Thiru, of the Institute of Chartered Accountants, stated the figures confirmed the UK’s restoration from recession had “picked up steam” regardless of strike motion and moist climate inflicting financial exercise to flatline in June.
Nonetheless, Mr Thiru warned the enhance owed extra to falls in inflation and occasions resembling Euro 2024 than a significant enchancment in the UK’s underlying development trajectory, and was unlikely to be sustained within the second half of 2024.
He cautioned that the figures might trigger the Financial institution of England to delay its subsequent rate of interest lower by offering the central financial institution with “sufficient assurances over the energy of the economic system to carry off stress-free coverage”.
Describing Britain’s economic system as having fun with “one other gangbusters quarter”, Yael Selfin, chief economist at KPMG UK, stated that although development was anticipated to gradual later this yr, general development for 2024 might hit 1.1 per cent, which she famous was “nicely above expectations initially of the yr”.
Jake Finney, an economist at PricewaterhouseCoopers, stated: “The newest development statistics present extra proof that the economic system is steadily turning a nook as the brand new authorities takes workplace.”
Lydia Prieg, of the New Economics Basis, warned that “small enhancements in GDP don’t change the truth that the UK economic system has lengthy been at a standstill due to over a decade of underinvestment by successive governments”.
“If this authorities desires to set us on a brand new path it might’t simply depend on personal funding. This method has been tried and examined and it’s left us with crumbling hospitals, sky-high power payments and a second-rate public transport system,” stated Ms Prieg.
“Now we’d like this authorities to make sensible public investments: in renewables to get power payments down, in inexperienced trade and infrastructure to spice up development and wages, and within the NHS and social safety to assist us preserve wholesome.”
