THE UK economy unexpectedly eked out growth in the final three months of last year – but a key measure showed living standards actually fell, according to new figures.
Official Office for National Statistics (ONS) data showed gross domestic product (GDP) edged 0.1% higher between October and December, defying forecasts by analysts and the Bank of England for a contraction in the quarter.
It follows zero growth in the previous three months, which had led to fears that the UK was on the brink of recession.
However, the latest data also showed living standards under pressure, with real GDP per head – the volume of goods and services available to the average person, according to the ONS – falling by 0.1% in the last quarter and by 0.1% across 2024 overall.
The SNP’s economy spokesperson at Westminster, Dave Doogan MP, said that Labour had “promised to fix Brexit Britain’s broken economy but instead it has made things even worse – with the weakest possible growth, GDP per person falling, increased unemployment, rising prices, and looming austerity cuts”.
“Families and businesses across Scotland are paying the price for the Labour Government’s failure and its damaging policies, including the National Insurance tax hike and the political choice to stay out of the EU single market, which is costing Scotland billions of pounds in lost growth, trade and investment every year.”
Doogan added: "The Chancellor has confirmed she possesses only a notional grasp of fiscal cause and effect and now, on top of failing to fix fourteen years of Tory economic decline, she's added her own economic chaos into the mix. Her unforced fiscal errors are costing business and workers dearly."
BrewDog founder James Watt, who on Thursday launched an unofficial government watchdog styled after Elon Musk and aimed at cutting public spending, said that the real story was the fact that the data showed a fall in living standards.
“Whilst today’s paltry growth numbers show the economy essentially flatlined for the last six months, the real story is that GDP per head dropped in Q4 2024 meaning that the standard of living dropped for everyone in the UK,” Watt said.
“As the Government grapples with downgraded economic forecasts and higher borrowing costs, 0.1% growth in Q4 is not going to plug the serious gaps in our public finances.”
While the figures have mixed news, they ease the immediate pressure on Chancellor Rachel Reeves, who is struggling to deliver the pledged economic growth. However, there are still worries over whether she will meet her fiscal rules, as well as the impact on businesses and jobs from recent Budget measures.
“And that’s why I am determined to go further and faster in delivering the economic growth and the improvements in living standards that our country deserves.”
The ONS said growth in services and production drove the growth in December, which was the fastest monthly growth since March last year.
The fourth quarter figures and an upward revision to first quarter output – to 0.8% growth from 0.7% previously – means the economy grew by 0.9% overall in 2024, up from 0.4% growth in 2023.
But experts said the economy was not out of the woods yet, with the Bank last week halving its forecast for growth to just 0.75% for 2025.
Warnings are mounting that moves to hike national insurance contributions and the minimum wage at last October’s budget will see businesses raise prices and slash jobs.
However, Britain’s independent forecaster, the Office for Budget Responsibility (OBR), is expected to reveal downgrades to growth forecasts in the spring statement on March 26, which it has reportedly warned the Chancellor this will wipe out her £10 billion “headroom” — spare money against its spending plans.
This will put Reeves under pressure to cut spending or even resort to potential tax rises to keep her on track with fiscal rules, according to economists.
Economist James Smith at ING cautioned that “tweaks to future spending plans look likely in March”.
He said: “The lacklustre end to 2024 will only cement the loss of fiscal headroom the Treasury must now grapple with.
“The OBR has predicted 2% growth this year. It now looks likely it will be around half that.”
