UK to leave recession as economy returns to growth, says ONS

BRITAIN is poised to exit recession as the economy returned to growth in January.

Increased activity across the construction sector and a rebound in retail led to a 0.2pc jump in real gross domestic product (GDP) in the first month of the year, according to the Office for National Statistics (ONS).

The growth comes after the UK fell into a technical recession at the end of 2023, which is defined as two consecutive quarters of falling GDP.

UK GDP dropped by 0.3pc between October and December 2023, having fallen by 0.1pc in the previous three months.

However, January’s 0.2pc rise follows comments from Andrew Bailey, the Bank of England Governor, who last month said Britain’s recession may already be over.

The latest figures will boost Rishi Sunak, the Prime Minister, who has vowed to grow the economy. Sanjay Raja, chief UK economist at Deutsche Bank, said: “The economy is starting to turn a corner. The technical recession that the UK slipped into late last year will be short-lived.”

Ruth Gregory, deputy chief UK economist at Capital Economics, added: “It now looks as though GDP in Q1 will rise by something like 0.1pc quarter-on-quarter rather than contract by 0.1pc as we currently forecast.”

The services sector was a key driver of growth, rising by 0.2pc after a 0.1pc fall in December. This was primarily a result of retail sales, which leapt by 3.4pc. A 2.6pc rise in housebuilding activity also caused a 1.1pc monthly jump in overall construction.

Liz Mckeown, ONS director of economics statistics, said: “The economy picked up in January with strong growth in retail and wholesaling.

“Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.”

Jeremy Hunt, the Chancellor, said the numbers showed progress in the Government’s aim of growing the economy.

However, Suren Thiru, economics director at the Institute of Chartered Accountants of England and Wales (ICAEW), warned the monthly figures could slump again in February as heavy rainfall deterred shoppers.

He said: “January’s recovery may have been followed by a more muted performance in February, with the significant wet weather likely to have suppressed activity, despite a boost to incomes from lower inflation.”