Yorkshire Times
Weekend Edition
8:43 AM 11th July 2024

Growth Remains Precarious Despite Stronger-Than-Expected GDP Recovery

ONS data showed monthly GDP rising by 0.4% in May, following no growth in April.

The warmest May on record helped stoke a stronger-than-expected recovery in GDP growth, driving activity in consumer-facing sectors like retail as well as supporting construction activity. It’s good to see manufacturing picking up as well, meaning that all the main sectors contributed to growth.

Growth is expected to be supported this year by improving real incomes and a strong labour market, with lower interest rates further out likely to support lending and business investment. But stepping out of the minutiae of GDP data, the UK’s growth remains precarious. IoD members were cautious on the outlook for the year ahead in the run-up to the election, with IoD data showing a drop-off in confidence, investment and hiring intentions.

The new government’s commitment to delivering growth is heartening, and their early steps to deliver on that commitment are encouraging. Early announcements on the National Wealth Fund and on planning are welcome indications of the importance that investment will play in changing the UK’s growth story.
Anna Leach, Chief Economist at the Institute of Directors

The UK has had a strong start to the year and today’s data showing 0.9% growth in GDP in the three months to May is better than expected. Growth for May itself also ticked up at 0.4%, with the services sector performing well. This is further evidence that the economic shocks of the last five years are winding down as businesses get back onto a growth footing.

Our latest economic survey, published earlier this week, showed business confidence has improved. However, that positive sentiment is not yet translating into increased investment for most SMEs. The BCC’s most recent quarterly economic forecast expects GDP growth of 0.8% for the whole of 2024.

It’s important that the new Government capitalises on this momentum, and it was encouraging to hear the Chancellor focus on boosting growth in her first speech on Monday. This is a major priority for businesses, especially after five years of economic shocks.

We’ve been clear about where government should be focused to unlock investment. Our Future of the Economy report calls for an industrial strategy with green innovation at its heart, better skills planning, business rates reform, improving our trade relationship with the EU, and helping SMEs access the opportunities of AI.
David Bharier, Head of Research at the British Chambers of Commerce

The latest data shows that the UK’s economic recovery is starting to put down roots. While growth in May was driven by a rebound in sectors such as retail and construction, which were hit by poor weather earlier in the spring, recent months have seen activity creeping up across a wide range of sectors.

The new Labour government will benefit from some economic tailwinds going forward, with consumer confidence rising as lower inflation and strong wage gains support household incomes. However, many firms remain cautious about the near-term outlook. While the outcome of the election will help dispel some of the recent uncertainty, it could take a turning of the interest rate cycle for the recovery to really bed in.

The new government’s focus on making growth a priority is welcome. However, to put the economy on a pathway to long-term, sustainable growth, we need to see concrete actions to deliver that vision within the next 100 days.

While recent commitments to reforming the planning system are hugely welcome, firms are also keen to see progress in other key areas. A Net Zero Investment Plan would support ambitions to boost green growth, and a clear business tax roadmap would help deliver the stability that firms are looking for.
Ben Jones, CBI Lead Economist