The UK economy grew by more than initially estimated at the start of this year, according to figures from the Office for National Statistics (ONS).

The economy grew by 0.7% between January and March 2024, up from the previous figure of 0.6%. Growth in the UK services sector helped to push it even higher, the ONS said.

The positive news on growth followed the UK inflation rate falling to its lowest level in almost three years.

According to the ONS, the Consumer Prices Index (CPI) rose by 2% in the year to May 2024, down from 2.3% in April.

The data showed that whilst prices are still rising, they’re increasing at their slowest pace since July 2021.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said the data is ‘a further sign that the UK is exiting the inflation crisis which began in late 2020’.

He continued: ‘It provides additional weight for an interest rate cut in the coming months, something which will be welcomed by firms of all shapes and sizes.

‘Our research has shown that a steadily declining number of businesses are concerned about inflation, from a record peak of 84% in mid 2022. This is positive news, but prices are not falling, just rising more slowly, and the economic outlook remains challenging.’

Internet links: ONS ONS BCC

The UK has the lowest rates of investment of any other country in the G7, according to analysis by the Institute for Public Policy Research (IPPR).

It found that, compared to the USA, Germany, France, Italy, Canada and Japan, the UK was in last place for business investment in 2022.

The IPPR also revealed that the UK has been bottom of the G7 league for investment in 24 out of the last 30 years. It said that the UK has the lowest rates of investment of any G7 economy, and that it ranks 28th out of 31 Organisation for Economic Co-operation and Development (OECD) countries for business investment.

According to the IPPR, countries such as Hungary, Slovenia and Latvia attract higher levels of private sector investment than the UK as a percentage of GDP.

Dr George Dibb, Associate Director for Economic Policy at the IPPR, said:

‘If the economy is an engine, then investment is its fuel. The UK’s dire productivity performance is the single biggest driver of our dire living standards. Without resources flowing into new investment, it’s hard to see how UK economic performance can improve.’

Internet link: IPPR

Real average earnings are just £16 a week higher than they were 14 years ago, according to research conducted by the Resolution Foundation.

The think tank said that the UK’s labour market backdrop to the General Election is a prolonged pay squeeze that has left real average wages today just £16 a week higher than in 2010. It stated that this has been caused by three shocks to pay packets in little over a decade, including the financial crisis, the Brexit referendum and the cost-of-living crisis.

According to the Resolution Foundation, in the 14 years prior to the 2010 election, average real wages grew by £145 a week in total.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said:

‘Britain’s prolonged pay depression has left average earnings just £16 a week higher than they were back in 2010, despite the welcome return of rising real wages in recent months.

‘Worryingly, Britain’s decade-long jobs boom during the 2010s has also gone bust, with the UK one of only a handful of countries where employment has yet to return to pre-pandemic levels.’

Internet link: Resolution Foundation

The UK’s business groups have pledged to work in partnership with the new Labour government to revitalise the nation’s economy.

Labour leader Sir Keir Starmer is the new Prime Minister after leading the party to a decisive win in the General Election.

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said:

‘Congratulations to the Labour Party on their victory after a long and hard-fought campaign.

‘The public have delivered them a clear and decisive parliamentary majority – hopefully they will use this mandate to provide the stability and certainty businesses crave.

‘How we revitalise our economy was hotly debated throughout the past six weeks, and it is encouraging to see they have many policies which clearly align with our recommendations.

‘But after a gruelling election the really hard work starts now. We need to see action from day one on pulling together a coherent industrial strategy for the long-term, which places a strong emphasis on harnessing green innovation.

‘Closing the skills gap, growing exports, boosting productivity and harnessing the power of AI won’t happen overnight.’

The Confederation of British Industry (CBI) also congratulated Starmer and Labour on their victory.

Rain Newton-Smith, CBI Chief Executive, said:

‘Delivering sustainable growth should be the defining mission for the new government. Business stands ready to bring its innovation, ideas, and investment to make that shared mission a reality.

‘Building a partnership for prosperity between government and business holds the key to unlocking a revitalised pitch to global investors.

‘By working with business, the new government can deploy the capability and capacity of industry to deliver the connected transitions across net zero, the digital economy, and the future of work needed to put the economy on a pathway to sustainable growth.’

Internet link: BCC CBI

The rate of UK inflation fell to 2.3% in the year to April, according to the Office for National Statistics (ONS).

Inflation is down from 3.2% in March and is the lowest level since September 2021.

However, it is still above the Bank of England’s 2% target. The drop was driven by falling gas and electricity prices after the energy price cap was lowered by Ofgem.

The drop in inflation followed news that the UK economy grew by 0.6% between January and March, according to the ONS.

It means that the country officially emerged from recession with growth led by the services sector.

Despite the improving outlook, the Bank of England held interest rates at 5.25% for the sixth month in a row.

The British Chambers of Commerce (BCC) said the fall in the rate of inflation was positive news that increased the likelihood of an interest rate cut in the coming months.

David Bharier, Head of Research at the BCC, added:

‘Uncertainty will persist with global conflicts and trade wars threatening supply chains. Real wage costs also continue to grow – our most recent business survey found almost half of firms expect their prices to rise over the next three months, with labour costs cited as the main driver.

‘While the outlook may have brightened, the skies aren’t yet fully clear. UK firms need to see a long-term vision for the UK economy from politicians, including action on making trade easier, especially with the EU.’

Internet link: ONS website ONS website Bank of England website BCC website