In line with economists' forecasts, the UK economy showed signs of slowing in the second quarter of 2024 with growth of 0.6%. The growth follows a strong 0.7% increase in the first quarter, signaling a recovery after experiencing a shallow recession in the second half of 2023.
The Office for National Statistics released data on Thursday showing UK gross domestic product (GDP) was steady in June, matching expectations in a Reuters poll of economists. Compared to the same month last year, GDP increased by 0.7%.
Suren Thiru, Economic Director of the Institute of Chartered Accountants in England and Wales commented
Despite the Bank of England's recent interest rate cut, he also expressed concern that economic growth could slow in the second half of 2024 due to persistently high interest rates, supply constraints and slower wage growth.
The Bank of England adjusted its annual growth forecast for 2024 by 0.5% to 1.25%, which was stronger than expected for the year. It expects growth of 0.7% in the second quarter. However, the bank's outlook for the rest of the year is less optimistic, with growth expected to slow to 0.4% in the third quarter and 0.2% in the final quarter, which is believed to be closer to the economy's underlying growth rate.
After the COVID-19 pandemic, the UK economy grew by just 2.3% from the fourth quarter of 2019 to the second quarter of 2024, with only Germany among the world's largest advanced economies performing particularly poorly in that period as energy costs rose following Russia's invasion of Ukraine.
Prime Minister Keir Starmer on 4 July 2008 set out ambitions for the UK economy to reach an annual growth rate of 2.5%, a target the country had consistently missed before the financial crisis. Chancellor of the Exchequer Rachel Reeves has set a formal target for the UK to lead the Group of Seven advanced economies in growth in GDP per capita for two years.
Despite these ambitions, Thursday's data showed that per capita output in the second quarter of 2024 was 0.1% lower than a year earlier and 0.8% lower than pre-pandemic levels. Reeves said the latest figures highlight the challenges facing the new government and reiterated his position that tough decisions are needed to strengthen economic fundamentals.
Growth in output per hour worked in the UK has slowed, a common trend in most advanced economies since the late 2000s, which has been a limiting factor in improving living standards. This was exacerbated by domestic issues such as low business investment and the general public's decision to leave the European Union in 2016.
Reuters contributed to this article.
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