UK economy returns to growth easing recession fears – what it means for your money

THE UK economy grew by 0.3% in January, latest figures from the Office for National Statistics (ONS) show.

The most recent Gross Domestic Product (GDP) data indicates the UK economy is on the up.

GDP is a measure of the size of an economy. If it’s rising then the economy is growing, if it’s falling then it’s shrinking.

It’s a return to growth after the UK economy shrunk by 0.5% in December and grew just 0.1% in November.

The ONS said the January boost came from the services sector, which grew by 0.5% after falling by 0.8% in December.

The largest contributions to growth came from the education, transport and storage, human health activities, and arts, entertainment and recreation sectors.

Meanwhile, the construction sector fell off by 1.7% in January after being flat in December.

Commenting on today’s figures, Darren Morgan, director of economic statistics at the ONS, said while the economy partially bounced back since the end of last year, it’s not all good news.

He said: “Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, showed zero growth.”

It comes after the UK economy narrowly avoided falling into a recession at the end of last year.

GDP was 0% for the three months to December.

The latest figures ease fears that we’re currently in a recession, which would be based on whether the economy grew or not in the three months from January.

Economists had been predicting that the economy would shrink by 0.4% in the first quarter of 2023.

But the British Chambers of Commerce expects the economy to grow by 0.6% in 2024.

Some economists now believe that the UK will avoid recession this year, but growth will remain slow.

Meanwhile, in February the Bank of England (BoE) predicted the UK economy will enter a recession this year but it will be shorter and less severe than previously thought.

It also predicted the economy will shrink by 0.25% in 2024.

Either way, the latest GDP figures from the ONS will be taken largely positively by the government as they gear up to deliver their budget next Wednesday, March 15.

What does it mean for my money?

A healthy economy is one that is growing and not in recession so the latest figures should be good news for consumers.

A country is in recession if there are two consecutive quarters of Gross Domestic Product (GDP) falling.

The year is split into four three-month quarters.

The economy remained unchanged in the three months to January, which means a recession was avoided.

Recessions are bad news because it usually means jobs will be lost and wages will stall.

It can can cause businesses to go into administration or bust too.

This, in turn, means the government gets less tax, which could mean cuts to public services and benefits such as Universal Credit. Tax rates might go up too.

The UK last went into recession in 2020 after the coronavirus pandemic hit, shutting down large parts of the economy.

The 2008 recession saw the loss of a number of high street stores including music retailer Zavvi, clothes shop Principles and Woolworths.

Following today’s figures, Alice Haine, personal finance analyst at Bestinvest, said the January growth was “better-than-expected”, but GDP flatlining in the three months to January 2023 would be a “concern” for household finances.

She added: “It indicates companies are making less money, slashing investment and re-examining their staff requirements – something that could see the pace of pay rises slow or worse cause a spike in redundancies.”