Growth returns for UK economy

The UK economy returned to growth in January, according to new figures from the Office for National Statistics (ONS).

UK GDP (gross domestic product), a key measure of economy growth, increased 0.2% in January, in line with expectations following a 0.1% fall in December.

The increase was supported by a pick up in construction activity (growing 1.1% quarter-on-quarter) and a stronger month for the services sector (increasing 0.2% quarter-on-quarter and acting as the largest contributor to the rise in GDP).

Production output, however, fell 0.2% quarter-on-quarter.

The modest growth comes after the UK fell into a recession.

Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said of the figures: “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.”