GDP increase sees UK exit recession – business industry reaction

13th May 2024

Latest Office for National Statistics (ONS) data has shown that the economy grew by 0.6% between January and March, with this marking the fastest rate of growth for two years and as a result the UK officially exited the recession.

The growth seen in Quarter 1 means the UK has emerged from recession, with the economy having posted two consecutive quarters of decline at the end of 2023.  The growth in the quarter was driven by a 0.7 per cent increase in services output and manufacturing output grew 1.4 per cent.

ONS Director of Economic Statistics Liz McKeown said “After two quarters of contraction, the UK economy returned to positive growth in the first three months of this year.

“There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well. Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.

“In the month of March the economy grew robustly led, again, by services with wholesalers, the health sector and hospitality all doing well.”

Martin McTague, National Chair of the Federation of Small Businesses (FSB) said “The rise in GDP across Q1 brings the recession from the end of last year to a mercifully swift end, and comes alongside a notable rise in small business sentiment over the first three months of this year.

“Our latest Small Business Index report for Q1 found that small firms’ overall confidence level rose into lightly positive territory after six straight quarters below zero, raising hopes that this year will be a brighter one for small business performance than the recent past.

“The month of March’s growth figure of 0.4% builds on the 0.3% and 0.2% recorded in January and February respectively. With twice as many small firms anticipating revenue growth in Q2 as bracing for a drop in sales, according to our research, we hope that this trend persists.

“The strong contribution to growth made by the production sector across Q1 can be seen in our research, with manufacturing being the most confident of the major sectors in the same period. Hospitality was the most negative major sector in terms of confidence, our report found, although it made a huge recovery in outlook when compared with the final quarter of 2023.

“Three successive months of growth is good news – the challenge now is to build on this momentum. Small firms will be listening carefully to political parties of all stripes as they set out their stalls, and measures which will lift their growth prospects will be especially welcome.”

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “The latest statistics for GDP growth are better than expected and suggest that a meaningful recovery in the economy may be underway. Both the services sector and the production sector were strong in the first quarter, growing by 0.7% and 0.8% respectively. The main area of continued weakness was construction, which contracted by almost 1%.

“Both the quarterly and monthly GDP figures paint an encouraging picture. Based on this evidence, there is no doubt that that the spectre of recession is fading fast, and the economy is starting to move forward again. This assessment is supported by the IoD’s latest survey findings from its members, which suggest that business confidence is improving.

“However, it would be premature to argue that the economy has definitively turned the corner. Although there are welcome signs of green shoots, any recovery is still at an early stage and it is likely to be fragile. As a result, there is still a compelling case for the Bank of England to cut interest rates at its next meeting on 20 June.”

David Bharier, Head of Research at the British Chambers of Commerce, said “Today’s Q1 GDP first estimate of 0.6%, outstripping expectations, is a welcome sign that the UK has moved away from last year’s shallow recession. Businesses across the UK have been the driving force behind the recovery.

“Firms have shown resilience in the face of multiple headwinds and this estimate should give business and investor confidence a boost.

“However, significant challenges remain. The UK has seen waves of economic and political uncertainty in recent years, from inflation to skills shortages and trade barriers with the EU, which have weighed down on its growth potential. Our latest surveys show that most SMEs are still not increasing investment.

“With signals from the Bank that their next move will be an interest rate cut, it is now essential that policymakers show businesses a clear plan for growth to unlock their economic potential.”

James Smith, Research Director at the Resolution Foundation, said “The UK swiftly exited its latest recession in 2024 with the strongest economic growth since late 2021.

“But the wider backdrop is still worrying. Britain is falling into recession twice as frequently as it did in the second of the 20th century, and it remains a stagnation nation. These all-too regular shocks and slumps in between are reducing living standards and straining the public finances.

“The battle of ideas on how to change this record should be key during the election campaign.”