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Another rise in GDP shows the UK are on track out of recession

Figures from the Office of National Statistics (ONS) show gross domestic product (GDP) rose by 0.1% in February, but despite positive indicators experts have warned ‘challenges still persist.’

 January 2024 was potentially one of the wettest starts to a new year that has been experienced for a while. Conditions had major effects on construction and retail, but deposit this, new ONS data shows GDP increased by 0.1% in February, matching City economists’ forecasts and extending a recovery after growth in January was revised up from 0.2% to 0.3%. 

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Commenting on the news, Liz McKeown, ONS director of economics statistics, said: ‘The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little, with public transport and haulage and telecommunications having strong months.

‘Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.’

In addition to the data showing a growth last month, the latest figures also highlight the rise of 0.1% over the last three months to the end of February. This is the first time this has happened since last summer, with activity recovering from a slump last year as households cut back on spending amid the cost-of-living crisis.

However, Douglas Grant, group CEO of Manx Financial, has warned that despite a positive increase, individuals and businesses are still set to face financial difficulties.

He said: ‘The most recent GDP figures in the UK serve as a stark reminder that despite certain recent positive indicators, challenges still persist. This underscores the importance for SMEs to seize this moment to reassess their existing lending arrangements and strengthen their positions.

‘The data is reflective of separate research conducted by Manx Financial Group that reveals a significant shift in the financial landscape for SMEs. In contrast to the previous survey, where only 25% faced challenges, the current findings indicate that two out of five SMEs are now grappling with operational slowdowns or halts due to a lack of external financing.

‘The survey also underscores that 15% of SMEs seeking external finance or capital are unable to secure the necessary funds. These financial constraints, coupled with a potentially unprecedented and volatile environment marked by ongoing conflicts, multiple elections, a tightening labour market, and persistent cost-of-living challenges, pose obstacles to the prospects of SMEs and national economic growth.’

In addition to SMEs struggling, the research from the ONS shows that construction output collapsed by 1.9% on the month as heavy rainfall forced cranes to sit abandoned on building sites. The UK’s dominant services sector, which makes up about four-fifths of the economy, also struggled. Figures show the sector only grew by 0.1% in February amid weaker activity in retail and wholesale distribution.

John Glencross, CEO and Co-Founder of Calculus, said: ‘Following a surprise contraction in UK GDP at the end of last year, today’s data signals small consistent steps back towards growth for the economy. The slight growth seen in the second quarter indicates that the UK is steadily emerging from a relatively short recession in record time.

‘As we observe where the economy will head in Q2 and beyond, now more than ever we need to support UK smaller businesses, which ignite growth, increase employment, and drive innovation.’

Image: Towfiqu barbhuiya

More on this topic:

Inflation: Figures remain steady but families will still have to go without

Inflation: Interest rates stuck at 5.25% for fourth consecutive time

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