UK GDP Grows 0.1% in Q4, Eases Recession Fears for Reeves

The UK's GDP unexpectedly rose by 0.1% in the final quarter of 2024, defying expectations of a contraction, with a notable monthly growth of 0.4% in December. This growth was primarily driven by an increase in the services sector and a recovery in construction, offering a temporary reprieve for Chancellor Rachel Reeves amid concerns over the economy's overall performance. Despite the positive headline figures, deeper analysis reveals weaknesses, including stagnation in household consumption and a significant drop in business investment, which fell by 3.2%. The Bank of England has adjusted its growth forecasts downwards, indicating a potential for fiscal tightening, including tax hikes, to manage increasing debt and ensure stability. Economists caution that the positive growth is fragile, with warnings that rising costs and global trade tensions could hinder further recovery. The upcoming report from the Office for Budget Responsibility (OBR) is expected to reveal limited fiscal headroom for the government, raising concerns over future economic strategies.