Rachel Reeves was given a lifeline on her birthday 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 contraction analysts had pencilled in.
The increase was fuelled by 0.4 per cent expansion in December, despite predictions of a dire pre-Christmas performance. Across last year as a whole growth was 0.9 per cent – almost all in the first half.
The official data eases alarm that the country could enter a technical recession, defined as two consecutive quarters of falling activity.
But Brits were getting poorer on a per head basis, as immigration continues to run at high levels. GDP per capita fell by 0.1 per cent in the fourth quarter and by the same proportion across 2024.
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.
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.’
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.