The UK’s economy expanded by 0.6% between April and June, continuing its recovery from a brief recession late last year, according to data released by the Office for National Statistics (ONS). This growth, in line with forecasts, follows a 0.7% increase in the first quarter of 2024.
The services sector drove the latest economic expansion, with notable contributions from the IT industry, legal services, and scientific research. Services remain the largest sector in the UK economy, far surpassing manufacturing and construction, which both experienced declines in output during the second quarter.
Liz McKeown, director of economic statistics at the ONS, highlighted the positive trend: “The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year.” The economy had entered a shallow and short-lived recession last year, defined by two consecutive quarters of shrinking economic activity.
While GDP grew over the quarter, June’s figures showed flat growth. This stagnation was partially attributed to strike action by junior doctors, which led to 61,989 cancelled NHS appointments between June 27 and July 2. Economists have warned of potential slowdowns in the latter half of 2024, partly due to high interest rates.
Anna Leach, chief economist at the Institute of Directors, noted, “Businesses are reporting modest activity for the summer months, no doubt affected by still high interest rates.” Earlier in August, the Bank of England reduced interest rates to 5% for the first time in four years.
The new government, led by Prime Minister Sir Keir Starmer, has vowed to address these economic challenges. In the King’s Speech, Starmer announced plans to ease infrastructure development and support economic growth. Chancellor Rachel Reeves acknowledged the difficulties faced, stating, “The new government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth.”
Shadow Chancellor Jeremy Hunt countered, asserting that the GDP figures “are yet further proof that Labour has inherited a growing and resilient economy.” Meanwhile, the manufacturing sector showed mixed results, with some growth in June despite an overall decline during the quarter.
Construction output dipped by 0.1% between April and June, driven by a drop in new building projects, although repair and maintenance activities grew. The ONS noted that the rate of decline in construction is easing. Future prospects for the sector may improve if the Bank of England further cuts interest rates.
Recent inflation data revealed an increase to 2.2% for the year to July, exceeding the Bank of England’s 2% target. However, inflation within the services sector continued to ease. Capital Economics expects the Bank to make additional interest rate cuts later this year.
Overall, while the UK economy shows positive signs of recovery, ongoing challenges and uncertainties remain as the country navigates its post-recession landscape.
