The first official figures for the UK economy in the final quarter of last year may not have been quite as bad as expected, but it says a lot that growth of just 0.1% can be trumpeted as “good news.”
The detail is also worrying.
Output per head fell again for the second successive quarter, meaning that headline growth is still flattered by the increase in the population.
Moreover, the only positive contributions came from higher government spending – financed by more borrowing – and a temporary boost from stockbuilding – as firms produced goods that they could not sell.
Activity in the private sector actually shrank, consistent with the gloom in the business surveys.
Even if the UK economy continues to skirt an outright recession, growth is likely to fall well short of the projections made by the OBR and baked into the Budget.
In short, the foundations of growth in the private sector have been undermined by the increases in tax and other business costs announced in the Budget, as well as by more state intervention in the labour and energy markets.
Fears over jobs are starting to weigh on consumer spending, despite rising real incomes, while business investment is being crowded out by the increase in government borrowing.
Growth may recover a little over the course of 2025 as more of the boost from higher public spending kicks in. But the economy may be flirting with recession all year – and the private sector is already in one.
