Britain’s economy is on track to avoid recession after growing by 0.1% in November, following a dip in the previous two months.

The uptick was slower than the 0.2% expansion predicted by City expectations but will be welcomed by the UK government after recent turbulence in financial markets sent its borrowing costs to the highest level for several years and the pound fell in value.

The dominant services sector grew 0.1%, while construction output rose 0.4%. This offset a 0.4% decline in industrial production.

Liz McKeown, director of economic statistics at the ONS said: “The economy continues to be broadly flat, having grown slightly in November following two small falls in the previous months,”.

She said wholesaling, pubs & restaurants and IT companies were “doing well”, which may come as a surprise to those owners who have been forced to close.

The data is unlikely to lift pressure on Chancellor Rachel Reeves whose position has been called into question after her harsh budget forced up costs and is likely to lead to higher prices in April.

She said: “I am determined to go further and faster to kickstart economic growth, which is the number one priority in our Plan for Change.

“That means generating investment, driving reform and a relentless commitment to root out waste in public spending, and today I will be pressing regulators on what more they can do to deliver growth.”

Ben Jones, CBI lead economist said:    ”After a string of disappointing data, it’s good to see that growth returned to positive territory in November, though the economy is still only on track for a very modest expansion at best over the final quarter of last year.

“In the wake of the Autumn Budget a mood of caution seems to have settled over UK businesses. Many firms are entering 2025 with a focus on reducing operational expenditure, which is likely to weigh on pay, hiring and investment in the months ahead. 

“The Government can help shift the UK’s economic narrative with more determined focus on measures that could underpin growth. Reforming the business rates system, implementing flexibility in the Apprenticeship Levy and supporting people to stay in work through expanding employer occupational health provision would give businesses immediate flex for investment.

“In the long-term there is a pressing need to develop an effective industrial strategy that supports our whole economy.” 

Andrew McRae, FSB Scotland policy chair, said:  “These stagnant figures underline just how delicate the economic situation is and why we need government measures – in Westminster and Holyrood – to boost growth now.   

“Small businesses are worried about rising costs, lumpy cashflow and the raft of proposed changes to employment law. That’s knocking their confidence and firms that aren’t confident don’t invest and don’t hire new staff – not a recipe for economic growth. 

“It is Scotland’s agile small businesses, who make up 98% of our entire business base, employ nearly a million people and turn over £93bn a year, who can deliver growth – and government action must be aimed squarely at creating a day-to-day trading environment that frees them up to do so.”   

London stocks rose in early trade as weaker-than-expected UK growth figures added to expectations of a rate cut next month. In the first hour the FTSE 100 was up by around 0.5% or 45 points at 8,346.04.

Housebuilder Taylor Wimpey this morning said it has begun the year with an increased order book compared to the start of 2024, thanks to stronger sales in the latter half of last year.

“We have seen an encouraging level of enquiries at the start of the year, however it is too early to gauge customer behaviour for 2025. Given our order book and current land position, we remain well placed to grow volumes in 2025, dependent on the evolution of mortgage rates and their impact on affordability.

“Whilst price negotiations for 2025 are ongoing, we anticipate increased build cost pressure as a result of the changed economic backdrop, including as suppliers seek to factor in the impacts of the recent UK Budget.”

Real estate consultancy Savills said challenging macro conditions are expected to continue for some time; however, most markets are in recovery.

“As we enter 2025, whilst current financial markets are characterised by uncertainty, sentiment has turned to expectations of progressive reductions in the cost of capital being likely during the year.

“We expect re-financing driven activity, the sustainability agenda and the trend towards corporates requiring greater office attendance for staff, to continue to be positive for transaction volumes.  These factors lead us to expect continued improvement through 2025.”

Wednesday market report

Shares in housebuilders rose as the slight drop in inflation to 2.5% fuelled hopes of interest rate cuts – and cheaper mortgages – this year.

Taylor Wimpey rose 4.8%, or 5.25p, to 114.35p, Barratt Redrow gained 4.4%t, or 17.8p, to 420.6p and Persimmon, which issued an upbeat update earlier this week, was 4.4%, or 49p, higher at 1163p.

FTSE 250 housebuilder Vistry yesterday stuck to its most recent earnings forecasts and revealed it has streamlined the business following three profit warnings last year. Its shares jumped 15.7%, or 81p, to 595.5p, but remain 60% lower since September.

Shares in pubs group Mitchells & Butlers which owns Glasgow’s Horseshoe Bar and the Sheep’s Heid in Duddingston, closed up nearly 7% after the company declared it was confident of tackling a £100 million hike in costs, following strong trading over Christmas.

The easing inflation pressures in the UK and US appeared to pave the way for interest rate cuts. The FTSE 100 rose 1.2% or 99.59 points, to 8301.13.

Ahead of today’s GDP figures, the pound traded at around $1.2180 from $1.2190 and just below €1.1840, above 10-week lows.

On Wall Street, JP Morgan, Goldman Sachs, Wells Fargo and Citigroup were buoyed by a rebound in dealmaking, with a surge in profits and belief that Donald Trump will be good for the economy.

Wells Fargo boss Charlie Scharf said: ‘We feel optimistic about where we are going into 2025.’

JP Morgan chief executive Jamie Dimon said: “The US economy has been resilient. Businesses are encouraged by expectations for a more pro-growth agenda.”