16 January 2025
If you are covering the latest UK GDP data, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“Following a 0.1% contraction in October, the UK economy improved marginally in November with a 0.1% increase in monthly real GDP. While the risk of recession remains modest for now, the UK is not yet out of the woods, and in the three months to November the economy flatlined.
“This weak growth can in part be attributed to the fallout of the government’s budget, which saw consumers hit pause on spending. As we move further into this year we could see an even bigger impact. Businesses will soon feel the effects of increased national insurance contributions, the costs of which are likely to be passed on to employees. Wage growth is expected to take a hit, and spending could be dampened further as a result.
“In addition, Trump’s inauguration is nearing, and the true effects of his policies will start to be felt later in the year. Hopefully, the UK will be relatively sheltered from the impact of his anticipated tariffs compared to some of its peers, but there is still a great degree of uncertainty on the horizon.
“Generally speaking, markets have been sceptical about the prospect of further rate cuts in the UK in the early part of this year, and less than two quarter point cuts are being priced in for the full year. The Bank of England stood alone in its decision to hold rates in December while the ECB and Federal Reserve forged ahead with cuts. However, should the economy fail to pick up at least some momentum and the UK falls into a recession, it may be forced to change tack.
“It appears the Chancellor has a large task ahead, given she is banking on growth to drive the economy.”
