UK Economy Eeks Out Modest Growth in Final Quarter of 2024 After Strong December

The UK economy concluded 2024 with a modest growth spurt in the final quarter, following a robust performance in December. According to the Office for National Statistics (ONS), gross domestic product (GDP) increased by 0.1% in the fourth quarter, driven by the services sector and construction. However, production output fell by 0.8% during the same period.

The ONS data reveals that the services sector grew by 0.2% in the fourth quarter, while construction output expanded by 0.5%. In contrast, production output contracted by 0.8%, with mining and quarrying (-2.5%) and electricity and gas (-0.7%) contributing to the decline. The manufacturing sector, which accounts for a significant portion of production output, grew by 0.7% in the fourth quarter.

The strong growth experienced in December was primarily driven by increases in services and production output. The ONS reported a 0.4% increase in services output and a 0.2% rise in production output in December. This growth was supported by a 0.7% increase in manufacturing output, with seven of its 13 subsectors contributing positively to the overall growth.



The UK's economic performance in 2024 was characterized by a 0.9% growth in real GDP, with a slight fall in GDP per head of 0.1%. This growth rate is lower than the 1.5% growth projected by the EY ITEM Club in October 2024, which was later revised down to 1% in February 2025. The slower-than-expected growth in the UK economy can be attributed to several factors, including a weaker-than-expected end to 2024, increased employer National Insurance Contributions (NICs), global trade uncertainty, higher energy prices, and weak demand elsewhere in Europe.

In comparison, other major economies have experienced varying degrees of economic growth in 2024. The U.S. economy grew by 2.2% in 2024, while the Eurozone economy grew by 1.3%. The differences in growth rates can be attributed to various factors, such as fiscal and monetary policies, trade agreements, and domestic demand.

Fiscal and monetary policies play a crucial role in shaping the UK's economic trajectory, and the latest GDP figures may influence their evolution. The UK government, led by Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves, has been focusing on achieving economic growth as a priority. The latest GDP figures, showing a 0.1% growth in the fourth quarter of 2024, may provide some relief but still indicate a fragile economic situation. The government's fiscal policy, including the budget announced in October 2024, aimed to spare pain from working people while addressing dire public finances. However, businesses have expressed concerns about the hikes to employer National Insurance contributions from April 2025, which could impact investment, job cuts, and pay rises. The government may need to reassess its fiscal policy to balance the need for growth with the constraints of its self-imposed borrowing rules.

The Bank of England (BoE) has been closely monitoring the UK's economic performance. In response to the latest GDP figures, the BoE may adjust its monetary policy to support economic growth. The BoE halved its forecast for growth in 2025 to 0.75% in February 2025, indicating a more cautious outlook. The GDP figures may influence the BoE's decision-making process regarding interest rates and quantitative easing. If the economy continues to show signs of weakness, the BoE may consider further easing monetary policy to stimulate growth. Conversely, if the economy picks up, the BoE may consider tightening monetary policy to control inflation.

In conclusion, the UK economy eked out modest growth in the final quarter of 2024 after a strong December, driven by the services sector and construction. However, production output fell by 0.8% during the same period. The UK's economic performance in 2024 was characterized by a 0.9% growth in real GDP, with a slight fall in GDP per head of 0.1%. The slower-than-expected growth in the UK economy can be attributed to several factors, including a weaker-than-expected end to 2024, increased employer National Insurance Contributions (NICs), global trade uncertainty, higher energy prices, and weak demand elsewhere in Europe. Fiscal and monetary policies play a crucial role in shaping the UK's economic trajectory, and the latest GDP figures may influence their evolution. The UK government and the Bank of England will need to carefully consider the economic data and adjust their policies accordingly to support growth and maintain stability.