UK Economy Grows in Final Quarter of 2024
The UK economy managed a small but unexpected growth of 0.1% in the final three months of 2024, avoiding a predicted contraction. The Office for National Statistics (ONS) credited this growth to improvements in the construction and services sectors, while manufacturing and production struggled. A stronger-than-expected December played a key role, with pubs, bars, and machinery manufacturers seeing increased activity.
While the positive growth helps the UK dodge an immediate recession, economic uncertainty remains. Over the course of 2024, the economy grew 0.9%, but GDP per capita—a key measure of living standards—declined for two straight quarters. This suggests that despite overall growth, individual households may not feel the benefits.
Businesses face rising costs in 2025
Business leaders are voicing concerns about rising costs. From April, companies will face higher National Insurance contributions, a minimum wage increase, and a reduction in business rates relief. Many fear these changes will limit investment, slow hiring, and put pressure on wages. The Bank of England also slashed its 2025 growth forecast from 1.5% to 0.75%, warning that economic progress is likely to remain sluggish.
Chancellor Rachel Reeves defended the government’s economic strategy, saying they are "removing the barriers that get in the way of businesses who want to expand." However, critics argue that her tax policies are stifling growth. Shadow Chancellor Mel Stride claimed, "Her budget is killing growth. Working people and businesses are already paying for her choices with ever-rocketing taxes, hundreds of thousands of job cuts and business confidence plummeting."
Donald Trump to potentially enforce tariffs on UK
International factors are also adding pressure. Donald Trump’s return to the White House has heightened fears of new trade tariffs, which could disrupt UK exports and supply chains. While the UK hopes to avoid harsh US tariffs, global uncertainty remains a major risk to economic stability.
Bank of England cut interest rate - but is it enough?
The Bank of England’s recent interest rate cut to 4.5% was aimed at easing financial pressure, but inflation is expected to rise again to 3.7% by late 2025 due to increased energy costs and price adjustments. This means households may continue to struggle with rising living expenses.
Despite these challenges, December’s 0.4% growth offered a glimmer of hope. Sectors like film distribution, hospitality, and construction performed well, though computer programming, publishing, and car sales lagged behind. Business owners remain cautious as increased costs are set to come.
As the UK heads into 2025, the government faces mounting pressure to balance economic growth with rising costs for businesses and consumers. With potential trade disputes looming and domestic tax changes taking effect, the road ahead remains uncertain.
