GDP rises

UK returns to growth as Scottish hiring slows

Employment law
Hiring has slipped despite the economy’s growth

Britain’s economy returned to growth in January with GDP rising 0.2% and providing a boost to the UK government which insists its plan is working.

The figure signals that the UK economy could be heading out of the recession that it fell into at the end of last year. Analysts had expected it to be brief as inflation continues to fall.

The Office for National Statistics (ONS) said the services sector led the bounce back, after retailers struggled to attract shoppers.

Liz McKeown, director of economics statistics at the ONS, said: “The economy picked up in January with strong growth in retail and wholesaling.

“Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.”

The economy shrank by 0.3% between October and December, after it had already contracted between July and September. The UK is in recession if it fails to grow for two successive quarters.

Chancellor Jeremy Hunt said: “While the last few years have been tough, today’s numbers show we are making progress in growing the economy – part of which makes it possible to bring down national insurance contributions by £900 this coming year.

Jeremy Hunt
Jeremy Hunt

“But if we want the rate of growth to pick up more we need to make work pay which means ending the unfairness of taxing work twice.”

Ben Jones, CBI lead economist, said: “We take some encouragement from this morning’s figures. Not only do they increase our confidence that the economy will exit its mild recession in the first quarter, but growth was a little stronger than expected. Alongside the recent upturn in some business surveys, this adds to signs that the economy may be turning a corner.  

“Momentum is likely to remain weak in the near-term, but the outlook for this year is improving. With both energy and domestic inflation moderating faster than expected, the chance of a modest cut in interest rates in the summer has risen. And the recent Budget will deliver some added relief for consumers and build on the measures in the Autumn Statement to strengthen incentives for business investment.”

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, said: “The revival has been brought by a rebound in retail sales, and forward-looking indicators confirm that the economy will continue to brighten in the months to come.

“More encouragingly, the Bank of England’s cautious forecast for growth of 0.1% over Q1 of 2024 is on track to be exceeded. Nonetheless, continuing evidence of inflationary pressures will likely dissuade interest rate setters from cutting borrowing costs just yet.  

“Even more encouragingly, in last week’s Budget, Chancellor Jeremy Hunt added to expectations that UK growth outlook should improve in the coming months, with a package of expansionary measures amounting to 0.5% of GDP potentially providing an additional boost to overall demand.

“On balance, so long as activity maintains its momentum, conditions indicate an improving outlook for the rest of 2024.” 

The data, however, coincides with new figures showing the recuitment sector tightening.

Hiring activity across Scotland fell again in February, although pay pressures persisted amid competition for skilled workers, according to the latest Royal Bank of Scotland Report on Jobs.

Recruiters who responded to the survey, compiled by S&P Global, reported falls in permanent staff appointments at the quickest pace in 15 months, while temporary billings have moderated since January.

Anecdotal evidence of economic uncertainty and subdued demand for staff has weighed on hiring decisions. Demand weakness was highlighted by marked falls in both permanent and temporary vacancies during February.

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