Richard Carter, head of fixed interest research at Quilter Cheviot, has shared his thoughts on the latest UK GDP quarterly national accounts data.
The UK economy continues to tread water, with today’s national accounts confirming just how anaemic growth was at the end of 2024. Real GDP rose by just 0.1% in the final quarter, driven largely by modest growth of 0.1% in the services sector and 0.3% in construction. The broader picture remains one of stagnation, with GDP per head estimated to have fallen by an unrevised 0.1% and underlying weakness across key areas such as business investment and production.
This week’s Spring Statement provided little room for fiscal manoeuvre. Chancellor Rachel Reeves is clearly constrained by weak growth, soft productivity, and higher debt interest payments, and the OBR’s decision to halve its growth forecast for 2025 only underlines the challenge. The government remains reluctant to raise taxes for working people, but this leaves limited options when it comes to funding its priorities, and the economic backdrop is doing few favours.
Adding to the uncertainty is the looming threat of US tariffs on UK-made cars. With the automotive sector already under pressure from rising costs and complex supply chains, the introduction of a 25% tariff by the US risks further denting export prospects. This could filter through into GDP data later this year, particularly if reciprocal measures or delays in supply chains knock manufacturing confidence.
While markets continue to look to the Bank of England for rate cuts later in the year, today’s figures offer little that would bring that moment forward. The economy remains subdued, but with inflation proving sticky and global risks mounting, the Bank is likely to take a cautious approach.
With global trade tensions rising and domestic consumption fragile, the UK economy is far from out of the woods. Any recovery through 2025 is likely to be slow and uneven, particularly if international headwinds continue to build.
