The UK has defied its critics and delivered better-than-expected results in Q1 2024, and is now officially out of recession.
Official statistics show that the economy grew by 0.6% between January and March, the fastest rate for two years.
The UK fell into recession at the end of 2023 after shrinking for two consecutive quarters.
Prime Minister Rishi Sunak said the economy had “turned a corner”, but the Labour Party, Britain’s largest opposition party, said this was no time for a “victory lap”. Last Thursday, the Governor of the Bank of England, Andrew Bailey, said that the UK was seeing a recovery, although it was not a strong one.
The recession was caused by a substantial reduction in consumer spending, which in turn was largely caused by the highest interest rates in 16 years. This means that people are paying more to borrow money for mortgages and loans.
On Thursday, the Bank said that inflation would fall close to its target level in the “next couple of months”. That led to optimism regarding the possibility of a rate cut in June. However, the latest growth figures have now dampened those expectations.
Ruth Gregory, deputy chief UK economist at Capital Economics, said it showed “the Bank of England doesn’t need to rush to cut interest rates”.
However, while the overall economy is growing again, many people might not be feeling any better off. When the impact of inflation and population growth are stripped out, growth per head is still 0.7% lower than a year ago. Young people are among the most affected by the current cost of living.