The UK economy grew by more than expected in February in a welcome boost for Labour and Rachel Reeves. Gross domestic product (GDP) expanded by 0.5%, driven by a boost in manufacturing and production.
This is higher than the 0.1% that had been expected by economists, and is an improvement after no growth was recorded in January. GDP is a measure of the size and health of the economy, with data released by the Office for National Statistics (ONS) every month.
However, these figures were before US President Donald Trump announced his “Liberation Day” tariffs last week, which are expected to hamper UK growth. A new report by the Bank of England this week following the bombshell announcement by the President warned of increased risks to global financial stability.
ONS director of economic statistics Liz McKeown said: “The economy grew strongly in February with widespread growth across both services and manufacturing industries. Within services, computer programming, telecoms and car dealerships all had strong months.“
She continued: “While in manufacturing, electronics and pharmaceuticals led the way and car manufacturing also picked up after its recent poor performance. Across the last three months as a whole, the economy also grew strongly with broad-based growth across services industries.”
Stephen Kinnock, a health minister, told Times Radio the latest GDP figures were “a good step in the right direction” but acknowledged there was still a “very long way to go“. Mr Kinnock said: “Obviously, the stability that this Government, the new Government that we’ve had since July, has brought is helping investors to make plans for the longer term.
“That helps drive up investment, which drives up employment, drives up growth, and that is good news, of course. There is still a very long way to go.”
Mel Stride, the shadow chancellor, said: “Since coming to office, Labour’s choices have killed growth stone dead and there is still a long way to go to recover. At the emergency budget, the forecasts for growth, inflation and borrowing all moved in the wrong direction because of Labour’s decisions.
“Hardworking families deserve better than a Government crowing about sluggish growth whilst they will be £3,500 worse off because of the jobs tax.”
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When GDP is higher, it generally means the economy is doing well. It is normally a sign there is more money being pumped into the economy, typically down to people spending and earning more. This growth generally leads to more job opportunities.
However, many businesses have actually warned they may take on less workers this year after changes to employer National Insurance contributions came into effect this month. If the rate of GDP growth is slower, or GDP declines, this means the economy is not doing so well.
If the economy declines for two consecutive quarters – or two three-month periods in a row – then the country is considered to be in recession. This can lead to employers cutting their hours and reducing their workforce, and also less chance of a pay rise. The UK last fell into recession at the end of 2023 – but it didn’t last long, and the country was considered to no longer be in recession at the start of 2024.
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