by Xinhua writer Zhang Yadong
LONDON, Feb. 16 (Xinhua) -- Latest data shows that the UK's economic growth in the fourth quarter (Q4) of 2024 exceeded market expectations, bringing a sense of relief. However, uncertainty still clouds future economic trends.
On Thursday, the Office for National Statistics reported that the country's gross domestic product (GDP) grew by 0.1 percent quarter-on-quarter in Q4 2024, while December saw a 0.4 percent increase in economic activity.
This result significantly surpassed market forecasts. Prior to the data release, institutions, including the Bank of England, had generally expected the UK economy to contract by 0.1 percent in Q4. With the previous quarter showing zero growth, the UK economy seemed to be on the verge of stagnation.
For the Labour government, which has faced heavy criticism, this unexpected economic growth provides some relief. Chancellor of the Exchequer Rachel Reeves has repeatedly stressed that promoting economic growth is the government's top priority.
However, since Labour took office in early July last year, the UK's economic momentum has weakened. In Q3 2024, GDP remained flat, in contrast to the 0.7 percent and 0.4 percent growth rates in Q1 and Q2, respectively.
Reeves' Autumn Budget, released in October, was viewed as unfavorable to economic growth. The budget increased employer national insurance contributions, raised the minimum wage and reduced energy price subsidies, resulting in business reluctance in hiring and weakened consumer confidence.
The release of the latest GDP figures brought a sense of relief to business organizations and research institutions alike.
"Confirmation that the economy grew slightly in Q4 is a small bit of relief for businesses in challenging times," said Stuart Morrison, research director at the British Chambers of Commerce.
Anna Leach, chief economist at the Institute of Directors, commented that the UK's 0.1 percent GDP growth in Q4 was encouraging as it exceeded the Bank of England's forecast of a 0.1 percent contraction. This suggests that the UK economy grew by 0.8 percent, compared with just 0.4 percent in 2023.
Meanwhile, Ben Jones, chief economist at the Confederation of British Industry, noted, "The rebound in activity in December is encouraging. Although growth over Q4 as a whole was still lackluster, the data supports our view that the loss of momentum in the second half of last year will prove to be a soft patch for the economy rather than a slide back into stagnation."
Despite these positive figures, uncertainty still clouds the UK's economic future.
"However, regardless of the headline data, it's clear that many firms faced a chill of uncertainty in the final months of last year. Our research shows the Autumn Budget created a challenging menu of cost pressures for businesses to try and stomach. The national insurance and minimum wage hikes are pushing firms to make tough decisions simply to balance the books. Changes to the employment rights legislation in the coming months are adding further costs and concern for businesses," said Morrison of the British Chambers of Commerce.
Leach of the Institute of Directors also warned that although Q4 growth exceeded expectations, "headwinds to growth are building, from both the international environment and a rapidly softening labor market."
Given these challenges, industry organizations and think tanks emphasized that the government must take further actions to sustain economic growth.
"Boosting business investment is fundamental for the UK to achieve stronger growth in the long term. Our immediate solutions for government are clear -- accelerate business rate reform, green-light more infrastructure projects and boost exports," Morrison said.
Leach said the government should seek to take the brakes off the private sector through moves to address the tax burden, particularly the costs of employment, and to improve the UK's trading relationship with the European Union.
"They want to see a government fired up to move from positive words to ambitious delivery, working with business to create the right environment for investment and expansion," said Jones of the Confederation of British Industry. ■
