The UK’s services sector boosted GDP in the final quarter, seeing a lift from human health activities and social work. The construction industry also contributed positively to GDP during the fourth quarter of 2024.
ADVERTISEMENTThe British economy grew by 1.1% on an annual basis in 2024, an upward revision from a previous estimate of 0.9%, the Office for National Statistics said on Friday. That’s compared to a total of 0.4% seen in 2023.
In the final quarter of last year, the economy expanded by 0.1% on a quarterly basis, reconfirming first estimates. This was in line with market expectations, as well as being a step up from the third quarter’s flat reading.
The services sector advanced 0.1% in the fourth quarter, which was revised down from 0.2% in the first estimate. The biggest contributions came from social work and human health activities.
Construction also rose 0.3%, whereas production was revised downwards from a fall of 0.8%, to a drop of 0.4% in the final estimate.
This was primarily because of falling metal products and basic metals manufacturing, as well as declining transport equipment production.
Net trade dropped as well in the final three months of 2024, along with gross fixed capital formation—meaning investment in fixed capital assets. Losses were offset marginally by a significant rise in gross capital formation, a broader investment category.
Household consumption also grew 0.1% in the fourth quarter, revised up from the flat reading recorded in the first estimate. This was mainly because of more spending on hotels and restaurants, as well as housing. Real government consumption expenditure increased 0.5% too, with more money going towards defence and public administration.
The UK economy grew 1.5% year-on-year in real terms in the final quarter of 2024, which was ahead of 1.4% in the first estimate. It was also the strongest yearly growth rate in two years.
This was mainly due to higher government spending, as well as fixed investment and business investment numbers, although household consumption fell slightly.
What’s ahead for the UK economy?
Although growth in the fourth quarter of 2024 was marginal and still lingered uncomfortably close to a contraction, it was a small dose of good news for investors. However, concerns remain, as escalating geopolitical tensions could still impact consumer sentiment in the coming months.
“A jump in retail sales in February and confirmation the UK economy managed to grow in the final quarter of 2024 were treated as small wins by the market. While not earth-shattering data, investors are taking any nuggets of good news they can get in the current fragile environment,” said Russ Mould, investment director at AJ Bell.
Pantheon Macroeconomics said in an email note: “Official growth data continue to show that Budget tax hikes and global uncertainty caused by President Trump dragged the UK close to stagnation in the second half of last year. Consumers reined back spending as they worried about tax hikes in October.”
British independent fiscal watchdog, the Office for Budget Responsibility, halved its 2025 growth forecast for the UK earlier this week—announced as Chancellor Rachel Reeves delivered her Spring Statement.
