British Economy Shows Slight Growth, Amid Concerns of Future Stagnation

The British economy eked out growth at the end of last year, as data published on Thursday revealed, slightly easing the pressure on the government as it tries to quicken the pace of economic growth.

Gross domestic product increased by 0.1 percent in the last three months of 2024, following zero growth in the previous quarter.

Most economists, including those at the Bank of England, had anticipated another quarter of stagnation at the end of the year; however, the economy grew faster than expected in December due to a surge in activity within the service sector.

The Labour Party, which came to power last summer, has stated that economic growth is its top priority. Nevertheless, growth has largely been elusive, with the economy maintaining a similar size since last spring.

Lawmakers have pledged to strengthen public finances, increase investment, and improve public services to enhance economic growth and living standards.

Some of the government's initial measures have faced criticism, especially the decision to raise taxes on employers. Throughout much of last year, the government conveyed bleak warnings about the state of the economy, adversely affecting consumer and business confidence. Recently, however, there has been a shift towards a more optimistic tone.

"For too long, politicians have accepted an economy that has failed working people," said Rachel Reeves, the chancellor of the Exchequer, in a statement on Thursday. "I won't."

She emphasized that the government was going "further and faster" to implement economic reforms.

The government has proposed a series of measures that economists believe could lead to stronger economic growth in the long run, such as reforming the planning system to facilitate the construction of housing and critical infrastructure, including wind farms and data centers.

Cabinet ministers have also aimed to persuade regulators that rules need to improve the economic outlook, not only mitigate risks.

Nonetheless, there is a rising sense of urgency and concern that these changes may take too long to yield higher growth, especially with the global economy facing potential disruption from a trade war prompted by President Trump.

Additionally, there is uncertainty regarding how companies will react to higher taxes when they take effect in April. Last week, the Bank of England indicated there is a significant risk that companies may respond by reducing employment.

For some firms, this adaptation has already begun. The supermarket chain Sainsbury's announced last month that it would be cutting thousands of jobs, attributing this decision to the recent tax increases.

Despite this, the budget also included a substantial increase in public spending for the next two years, a move anticipated to assist with economic growth. However, most economists agree that this will only have a short-term impact.

The central bank projected that economic growth should start to accelerate midyear, even as it revised its forecast for the year down to 0.75 percent. The National Institute of Economic and Social Research has been more optimistic, predicting this week that the economy would grow by 1.5 percent this year.

Weak economic growth has exerted pressure on the central bank to lower rates, but it remains uncertain how far that will proceed in light of rising energy prices. Last week, the central bank expressed that it anticipated inflation would accelerate this year, peaking at 3.7 percent in the third quarter, and policymakers noted that they would handle rate cuts cautiously.