Economy grows by 0.2% – industry reaction

13th March 2024

Latest figures released by the Office for National Statistics (ONS) have shown that GDP rose by 0.2% in January following a fall in output during the previous month..

The UK’s economy grew in January, boosted by stronger sales in shops and online and more construction activity. January’s growth figure raises expectations of the economy expanding in the first quarter overall, which would end the technical recession in the final quarter of 2023.

Commenting on the GDP figures, ONS Director of Economics Statistics Liz McKeown said “The economy picked up in January with strong growth in retail and wholesaling. Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.

“These were partially offset by falls in TV and film production, lawyers and the often-erratic pharmaceutical industry. Over the last three months as a whole, the economy contracted slightly.”

Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said “An increase in GDP is an encouraging start to the year, and one small firms will be relieved to see, as it raises hopes that we may be pulling out of the shallow recession declared following low levels of negative growth through the second half of 2023.

“It’s too early to celebrate with any great level of vigour, however, as small firms are certainly finding the going tough at the moment.

“The recent Budget contained some help for small firms, notably the raising of the VAT threshold from £85,000 to £90,000 and the cut to National Insurance contributions, but small firms hoped for more help with day-to-day costs.

“This isn’t just about existing businesses starting to turn to growth in 2024; this is about creating the conditions for people to set up in business for the very first time, the next generation of start-ups who will make up the ground we lost during the Covid years when the UK small business population contracted by 500,000, losing one in 10 of them.

“Our Small Business Index research has found particular cause for concern among hospitality and retail firms, which are trailing far behind the overall average in terms of confidence levels. Indeed, one in eight firms in the hospitality sector expect to close entirely in the next 12 months, nearly four times the rate for all businesses, which should be a huge wake-up call to the Government about the dangers facing many thousands of small businesses.

“Small businesses contribute an enormous amount to the economy, and a sustainable recovery will be built on their success and growth. Today’s news must be built on if it is not to turn into another false dawn for small firms.”

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “It is encouraging to see the UK economy returning to growth at the start of 2024 – after having been technically in recession at the end of 2023.

“Last week, the OBR forecast growth of 0.8% for 2024 as a whole. Although it is early days, January’s growth figure is consistent with achieving that kind of outcome.

“The latest figures show a bounce back in the retail sector, with retail output up 3.4% on the month, similar to the growth recorded in January’s figures for retail sales. This is an encouraging green shoot, given the weakness of the retail sector over the Christmas period.

“Interestingly, the professional services sector appears to be experiencing some weakness at the current time, with output in areas like legal and accounting services, and consultancy, registering material declines. Despite a positive start to the year, the UK economy remains in a relatively fragile position. The case for an early cut in interest rates by the Bank of England is still a strong one.”