The UK economy returned to growth in January, with gross domestic product (GDP) rising by 0.2%, according to the Office for National Statistics (ONS). The increase, driven by a surge in retail spending and a recovery in housebuilding, has boosted hopes that the recession that began in late 2023 will be short-lived.
The ONS reported that a 3.4% jump in retail sales was the main factor behind the 0.2% growth in the service sector. Higher spending on private healthcare also contributed. Construction output rose by 1.1%, led by a pickup in housebuilding, while the production sector, including energy and manufacturing, contracted by 0.2%.
Despite the monthly growth, the ONS cautioned against overinterpretation. Over the three months to January, GDP was 0.1% lower than in the three months to October 2023 and 0.2% smaller than a year earlier. GDP per capita remains below pre-pandemic levels. The UK entered a technical recession after contracting in the third and fourth quarters of 2023.
Chancellor Jeremy Hunt welcomed the figures, stating: “While the last few years have been tough, today’s numbers show we are making progress in growing the economy.” Shadow chancellor Rachel Reeves countered: “After 14 years of economic decline under the Conservatives, Britain is worse off.”
Economists noted that forward-looking indicators suggest further strengthening in February, reinforcing the view that the recession may be short and shallow. However, KPMG’s Yael Selfin cautioned that “the outlook remains relatively gloomy.”
