UK economy returns to growth for first time in three months

Monthly real Gross Domestic Product (GDP) is estimated to have grown by 0.1% in November 2024 largely because of a growth in services, following an unrevised fall of 0.1% in October 2024.

However, Real GDP is estimated to have shown no growth in the three months to November 2024, compared with the three months to August 2024, according to ONS figures released on Thursday.

“The near stagnation of GDP in November has dampened the optimism sparked by yesterday’s unexpected drop in inflation. Meanwhile, the widening trade deficit highlights the persistent challenges faced by UK businesses as they contend with an increasingly complex global landscape,” Samuel Edwards, head of dealing at global financial services firm Ebury, said in an email sent to Euronews Business.

“The incoming US administration brings both opportunities and challenges. While uncertainty around policy direction persists, there is optimism that closer trade ties could unlock significant potential in one of the UK’s largest markets. Meanwhile, the government’s efforts to strengthen links with the EU and China reflect a clear strategy to diversify export opportunities and enhance long-term economic resilience,” Edwards added.

It was also noted how the global trade environment remains highly unpredictable, and how recent volatility in the UK markets is a clear reminder of the risks businesses face.

“Exporters must act decisively to protect against potential risks, such as currency volatility and supply chain disruptions. Strategic planning, including robust hedging and ensuring ready access to finance, will be vital for those aiming to thrive internationally,” Edwards added.

Source of comfort for UK Chancellor

Meanwhile, a surprise drop in December’s inflation data has already been a source of comfort for the Chancellor.

“UK stocks and gilts rallied on the news following the rocky start to 2025 when shifting growth and inflation expectations, both in the UK and across the pond in the US, along with domestic concerns about the repercussions from Reeves’ raft of tax hikes, sent bond yields scuttling upwards and caused the pound to slide,” Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said in commentary sent to Euronews Business.

“Whether the improving growth picture will continue remains unclear as the road ahead is littered with potholes. December’s unexpected inflation dip has seen traders ramp up bets on the BoE pushing ahead with another rate cut next month – a move that would be welcomed by borrowers hoping for some respite from high mortgage and debt repayments,” Haine added.

Inflation, meanwhile, remains under pressure – not only from higher energy prices but the tax hikes imposed on businesses in Reeve’s Budget, which are set to take effect from April.

“Employers must not only absorb an increase in employee national insurance rates but also a rise in the minimum wage with major businesses already warning of plans to pass some of that cost to consumers by hiking prices. There may also be implications for job security and pay growth as employers reevaluate staff costs for 2025,” it was further noted by Haine.

Latest ONS figured also showed on Thursday that the total goods and services trade balance, excluding precious metals, widened by £3.8 billion to a deficit of £10.8 billion in the three months to November 2024, compared with the three months to August 2024.

Total exports decreased by £9.2 billion over this period, and imports fell by £5.4 billion.