On her birthday today, Rachel Reeves received a welcome boost as the economy showed an unexpected uptick in the final quarter of 2024.
While the growth was modest, it came as a surprise, particularly since analysts had predicted a slight contraction.
GDP increased by 0.1% between October and December, driven in part by a 0.4% jump in December itself—well above expectations, especially after forecasts of a sluggish performance heading into the holiday season.
Economic Growth Amidst Challenges
Despite this positive news, there’s still a mixed picture. On a per capita basis, people are actually getting poorer.
The GDP per person dropped by 0.1% in the fourth quarter and the same amount over the course of 2024.
The high levels of immigration continue to put pressure on the economy, contributing to this decline.
Meanwhile, fears are growing that the government may face even tougher decisions ahead.
With economic growth stalling and debt interest costs soaring, some are predicting that taxes might have to rise again.
The Office for Budget Responsibility (OBR) has reportedly wiped out the £10 billion “buffer” that Chancellor had built into the financial projections last October.
A Mixed Bag of Economic Sectors
In terms of sector performance, December did bring some positives.
Wholesale trade, film distribution, and pubs and bars had a strong showing, along with machinery manufacturing and the often volatile pharmaceutical industry.
However, these gains were somewhat offset by weaker performances in other areas like computer programming, publishing, and car sales.
Liz McKeown, Director of Economic Statistics at the Office for National Statistics (ONS), explained that the economy did pick up in December after a series of slower months, resulting in a modest overall growth for the fourth quarter.
However, she noted that the fall in production had partially balanced out the gains in services and construction.
As a result, GDP per head saw a slight decline.
Rachel Reeves’ Response and Plans
In response to the mixed economic data, Rachel Reeves emphasized her commitment to revitalizing the economy.
She’s focused on breaking down the barriers that have held back working people for far too long.
“For too long, politicians have accepted an economy that has failed working people. I won’t,” she said.
Reeves pointed to her “Plan for Change” as the path forward, aiming to put more money in people’s pockets after years of stagnation in living standards.
At the same time, leaked details confirm what many had feared: The independent OBR has significantly downgraded its economic growth projections, following similar cuts by the Bank of England.
In response, James Bowler, the permanent secretary at the Treasury, promised an inquiry into the release of provisional figures showing a small deficit.
The Road Ahead for the UK Economy
Looking forward, the National Institute of Economic and Social Research (NIESR) has raised alarms about potential shocks to the UK economy.
Should such a shock occur, Reeves may be forced to either relax her fiscal rules or find new ways to generate revenue to support continued economic activity.
The coming months will be crucial in determining how the government navigates these challenges and whether Reeves can deliver on her ambitious economic agenda.
This article was published on TDPel Media. Thanks for reading!
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