Positive News: GDP Increased by 0.1% in the Last Quarter of 2024, Providing Hope for Rachel Reeves’ Birthday; Possible Tax Hikes Looming

Rachel Reeves was given a lifeline on her birthday today as the economy unexpectedly grew in the final quarter of last year.

GDP grew by 0.1 per cent during the period from October to December. Although this increase may seem minimal, it is a significant improvement compared to the 0.1 per cent decline that analysts had predicted.

The growth in GDP was primarily driven by a 0.4 per cent expansion in December, surpassing expectations of a poor performance leading up to Christmas. Throughout the entirety of the past year, growth stood at 0.9 per cent, with the majority of the growth occurring in the first half of the year.

The official data eases alarm that the country could enter a technical recession, defined as two consecutive quarters of falling activity. 

Despite the overall economic growth, individuals in the UK were experiencing a decrease in wealth on a per capita basis. This decline was evident in the fourth quarter, with GDP per capita shrinking by 0.1 per cent. Similar trends were observed throughout the year 2024, with a consistent 0.1 per cent decrease in GDP per capita.

And the figures emerged amid mounting fears Ms Reeves – who turns 46 today – could be forced to hike taxes again amid stalling growth, spiking debt interest costs and global trade tensions. 

The OBR watchdog is believed to have completely wiped out the £10billion ‘headroom’ the Chancellor built into her sums in October.

Responding to the numbers, Ms Reeves said they were ‘higher than many expected’ but admitted she was ‘not satisfied’.  

Rachel Reeves was given a lifeline today as the economy unexpectedly grew in the final quarter of last year

GDP rose by 0.1 per cent between October and December – barely detectable, but significantly better than the 0.1 per cent contracted analysts had pencilled in

ONS Director of Economic Statistics Liz McKeown said: ‘The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year. 

‘Across the quarter, growth in services and construction were partially offset by a fall in production. GDP per head, in contrast, fell back slightly in the quarter.

‘In December wholesale, film distribution and pubs and bars all had a strong month, as did manufacturing of machinery and the often-erratic pharmaceutical industry. However, these were partially offset by weak months for computer programming, publishing and car sales.’

Ms Reeves said she was investing in the economy and ‘taking on the blockers’. ‘For too long, politicians have accepted an economy that has failed working people. I won’t,’ she said.

‘After 14 years of flatlining living standards, we are going further and faster through our Plan for Change to put more money in people’s pockets.’

Shadow chancellor Mel Stride said Ms Reeves’ October Budget was ‘killing growth’ and working people and businesses are ‘already paying for her choices.’

He said: ‘The Chancellor promised the fastest growing economy in the G7, but her budget is killing growth.

‘Working people and businesses are already paying for her choices with ever rocketing taxes, hundreds of thousands of job cuts and business confidence plummeting.’

The Bank of England’s updated forecasts last week suggested that inflation is easing more slowly than hoped, and growth has been weaker than expected

Simon Pittaway, Senior Economist at the Resolution Foundation, said: ‘Better than expected growth at the end of last year means that Britain has avoided another technical recession. But it remains mired in a living standards downturn, with GDP per person still below pre-pandemic levels.

‘In recent weeks, the Chancellor has set out welcome plans to boost longer-term growth, but short-term action may be needed to get the economy out of its current slump. 

‘And with the Government constrained by its fiscal rules, which the Chancellor is already at risk of missing next month, many will be hoping the Bank of England can ride to the rescue with faster interest rate cuts.’

Leaked details – effectively confirmed by the Treasury permanent secretary yesterday – suggest the independent OBR has followed the Bank of England in slashing predictions for the economy’s performance. 

James Bowler told MPs that an inquiry would be held into how the provisional figures, showing a small deficit, were handed to Bloomberg. 

The NIESR think-tank has raised concerns that if there is a shock to UK plc Ms Reeves will either have to break her fiscal rules or bring in more revenue to prop up activity with spending.