UK Economy Expands In Q2, Grows By 0.6%

Britain's economy grew 0.6 per cent in the second quarter of 2024, in line with economists' expectations and building on a rapid 0.7 per cent recovery in the first quarter of the year after a shallow recession in the second half of 2023, official figures showed.

In June alone, Britain's level of gross domestic product was unchanged, also in line with economists' forecasts in a Reuters poll and compared with a year earlier it was 0.7 per cent higher, the Office for National Statistics said on Thursday.

"These figures confirm that the UK's recovery from recession picked up steam in the second quarter, despite strike action and wet weather causing activity to flatline in June," said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.

However, he said he expected growth would slow in the second half of 2024 due to interest rates which remain near a 16-year high, despite this month's Bank of England cut, and also persistent supply constraints and slower wage growth.

At the start of the month, the BoE raised its annual growth forecast for 2024 to 1.25 per cent from 0.5 per cent due to a stronger-than-expected start to the year and an expectation of 0.7 per cent quarter-on-quarter growth in the three months to June.

But it was less upbeat about the outlook for the remainder of 2024, seeing growth slow to 0.4 per cent in the third quarter and 0.2 per cent in the final three months of the year - which it views as closer to the economy's underlying growth rate.

Britain's economy has grown slowly since the Covid-19 pandemic, expanding just 2.3 per cent between the fourth quarter of 2019 and the second quarter of 2024.

Only Germany, which was also hit hard by surging energy costs after Russia's invasion of Ukraine, has done noticeably worse among the world's largest advanced economies.

Prime Minister Keir Starmer said he wanted the economy to achieve annual growth of 2.5 per cent when campaigning in the run-up to July 4's election - a rate that Britain has not regularly reached since before the 2008 financial crisis.

Finance Minister Rachel Reeves set a more formal target for Britain to enjoy the fastest per capita growth in gross domestic product among the Group of Seven advanced economies for two consecutive years.

Thursday's figures showed output per head in the second quarter of 2024 was 0.1 per cent lower than a year earlier and 0.8 per cent lower than before the pandemic.

Reeves said the latest data showed the challenge facing the new government and repeated her position that she would need to take tough decisions to improve economic fundamentals.

Growth in output per hour worked has slowed in most advanced economies since the late 2000s - limiting increases in living standards - and Britain's long-standing domestic headwinds from low business investment were exacerbated by the public's 2016 vote to leave the European Union.