The latest official data released on Friday showed a steady recovery in the British economy in the first quarter of the year, marking the end of what economists call a “tech recession”.
According to data from the Office for National Statistics, the economy grew by 0.6% in the first quarter compared to the previous quarter, driven by good performance across various sectors, especially the services sector.
This growth exceeded economists' expectations of 0.4% and represents the strongest quarterly performance since the fourth quarter of 2021, when the economy recovered from a major slowdown caused by the Covid pandemic.
This positive growth comes after two consecutive quarters of weak contraction, which technically defines the UK as being in recession. However, despite this quarterly rise, overall growth in the UK economy over the past year has been minimal, mainly due to the impact of high interest rates, which remained at 5.25% – the highest in 16 years.
There are signs that this could soon change, with Bank of England Governor Andrew Bailey suggesting a rate cut could be on the cards in June if inflation continues to fall. The BoE, like central banks around the world, aggressively raised interest rates in late 2021 to counter inflationary pressures caused by supply chain disruptions during the pandemic and the Ukraine crisis.
While higher interest rates have helped to dampen inflation, they have also put downward pressure on the UK economy. Economists are optimistic that with moderate inflation and possible rate cuts, the economy could enter a phase of more sustainable growth, albeit at a moderate pace. The Bank of England expects growth of just 0.5% this year.
Debaprathim De, head of economic research at Deloitte, described the recovery as “surprisingly strong” and a potential turning point for the economy. But the ruling Conservatives, facing a potential electoral challenge from Labour, are hoping for a sustained economic recovery to ease financial pressures on households and generate positive sentiment among voters.
Chancellor of the Exchequer Jeremy Hunt hailed the growth figures as evidence of the economy recovering from the pandemic, while Labour's Rachel Reeves warned against premature celebration and stressed the need for continued economic support and stability.
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