Commuters in London.
Jason Alden/Bloomberg via Getty Images
The British economy has emerged from recession. Gross domestic product rose 0.6% in the first quarter, official figures showed on Friday, exceeding expectations.
Economists polled by Reuters had forecast growth of 0.4% from the previous three months of the year.
Britain entered a shallow recession in the second half of 2023 as persistent inflation continued to damage the economy.
Although there is no official definition of a recession, two consecutive quarters of negative growth are generally considered a technical recession.
The UK manufacturing sector grew by 0.8% in the January to March period, while the construction sector fell by 0.9%. On a monthly basis, the economy grew by 0.4% in March, after growth of 0.2% in February.
In terms of output, the services sector – crucial to the UK economy – grew for the first time since the first quarter of 2023, the Office for National Statistics said. The 0.7% growth was mainly driven by the transport services sector, which saw the highest quarterly growth rate since 2020.
British Prime Minister Rishi Sunak, whose Conservative Party recently suffered significant losses in local elections, welcomed the news. “The economy has turned around,” he said in a post on social media platform X.
“We know things are still difficult for many people, but the plan is working and we must stick to it,” Sunak added.
Suren Thiru, director of economics at ICAEW, a professional group for chartered accountants, struck a more measured tone. He said the positive impact of weaker inflation could be contained by a renewed caution about spending amid political uncertainty ahead of general elections expected later this year.
“Britain’s escape from recession is a rather hollow victory because the big picture is still one of an economy struggling with stagnation as poor productivity and high economic inactivity limit our growth potential,” Thiru said.
The Bank of England’s Monetary Policy Committee warned on Thursday that indicators of persistent inflation “remain high” and voted to keep its key interest rate at 5.25%.
The central bank forecast headline inflation of almost 2% in the near term, but said it expects a slight increase later this year as the effects of a sharp drop in energy prices fade.