Published On: Fri, May 10th, 2024
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Britain officially out of recession in huge boost for Rishi Sunak | City & Business | Finance


Britain is officially out of recession in a huge boost to Rishi Sunak.

The economy grew stongly during the first quarter of 2024 after slumping into the red at the end of 2023.

GDP has risen by 0.6 percent in the first three months of the year, from January to March, at a rate much faster than expected.

This was driven by growth in the services sector of 0.7 percent, while production went up 0.8 percent.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “With the short and shallow recession now behind us, households can breathe a sigh of relief and hopefully look forward to better times ahead.

“While the big sticking point for consumers has been the Bank of England’s cautious stance towards interest rate cuts, the rate-setting Monetary Policy Committee shifted its stance this week, raising the likelihood of a summer rate cut, perhaps as soon as next month, though many households would prefer that to be a certainty than a possibility to ease the financial pressures they are facing.

“Personal budgets have been badly bruised by rising bills and high borrowing costs over the past couple of years, with some consumers still struggling with the financial fallout from the protracted cost-of-living crisis.

“Using credit to cover everyday living expenses has become the norm for some, which is why troublesome debts must be tackled head on rather than hoping the problem will just go away.

“It is not just those out of work facing debt challenges: a fifth of clients in full-time employment seeking debt advice are grappling with a negative budget, where their expenditure exceeds their monthly income.”

She encouraged families to continue to be careful with their spending, to clear any expensive debts and to build up their savings and investments to avoid future budget shocks.

Independent economist Julian Jessop said on X: “The 0.6 percent UK GDP growth in Q1 is obviously good news: recession over, double the 0.3 percent in the euro area, and should prompt some upward revisions to 2024 forecasts.

“But two caveats: flattered by big contribution from net trade, and GDP per capita still 0.7 percent lower than a year ago.”

However, the construction sector shrank, with GDP falling 0.9 percent. Nicholas Hyett, investment manager at Wealth Club, said this was not a surprise.

He explained: “Real estate is particularly exposed to the effect of higher interest rates, and the upheaval of the pandemic is still rocking the office and retail sector – with increased home working and online shopping permanently changing demand. That’s not a trend that’s unique to the UK.

“The Bank of England will be particularly pleased with itself looking at these numbers. With the economy looking healthy, a rate cut on Thursday would be looking premature now.”

The central bank opted to keep the base rate at 5.25 percent in its latest decision this week.

The figures also showed there was an increased in household spending of 0.2 percent in the quarter, after declines in the two previous quarters.

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