UK economy unexpectedly grew by 0.1% in fourth quarter

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The UK economy unexpectedly grew by 0.1 per cent in the fourth quarter, in a modest boost for Labour as it seeks to fulfil its pledges to re-energise the economy.

The GDP figure for the final three months of the year from the Office for National Statistics marked an increase on the zero growth in the quarter that ended in September, but is still consistent with an economy that is struggling to gain momentum.

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Economists had forecast a 0.1 per cent fourth-quarter contraction, according to a poll from Reuters. The pound strengthened after the data release, up 0.5 per cent against the dollar at $1.251.

Chancellor Rachel Reeves has vowed to make growth the government’s chief mission, throwing her support behind projects including a third runway at London’s Heathrow airport and transport links between Oxford and Cambridge.

But the economy has repeatedly disappointed since Labour took power, stagnating in the second half of last year. Real GDP per head is estimated to have fallen 0.1 per cent in the fourth quarter, the ONS said.

The latest data capped a “disappointing year for growth”, said Hailey Low, an economist at the National Institute of Economic and Social Research.

“Low business and consumer confidence suggest that 2025 starts on shaky ground, with weak investment and cautious consumer spending hindering momentum,” she added.

Over the whole of 2024, the economy expanded by 0.9 per cent, the ONS said, a modest improvement on expansion of 0.4 per cent the previous year. However, this fell short of predictions in October by the Office for Budget Responsibility, the UK fiscal watchdog.

Annual growth was also far below that recorded in the US, where GDP expanded by 2.8 per cent in 2024.

The OBR is expected to cut its growth forecasts in the upcoming Spring Statement, hitting tax revenues and adding to the fiscal pressures facing the chancellor.

Last week, the watchdog told Reeves that the headroom she previously had against her key budget rule had been wiped out by factors including poor economic data.

Responding to Thursday’s GDP figures, Reeves said: “For too long, politicians have accepted an economy that has failed working people. I won’t. 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.”

The ONS figures showed that the economy expanded by 0.4 per cent in December following an unrevised growth figure of 0.1 per cent the previous month. The improvement was driven by output in the UK’s dominant services sector.