UK Economy Posts Marginal Growth in Q4 2024 as Services Offset Industrial Weakness

UK

Bank of England Cuts Rates After Surprise GDP Uptick

The United Kingdom’s economy narrowly avoided contraction in the final quarter of 2024, with GDP rising by just 0.1%, according to official figures. This slight growth follows a stagnant third quarter and reflects modest resilience in the face of persistent economic headwinds.

Services and construction sectors supported the economy, while the production sector continued its downward trend for a fifth straight quarter. Despite its fragility, this growth exceeded the Bank of England’s prior projection of a 0.1% decline, leading the central bank to adjust its monetary stance.

Central Bank Lowers Rates Amid Revised Outlook

In early February, the Bank of England responded to the surprise GDP uptick by cutting its base interest rate by 25 basis points, down to 4.5%. While the cut aimed to support economic activity, the bank simultaneously halved its 2025 GDP growth forecast from 1.5% to 0.75%. This adjustment reflects increasing concern over weak industrial output and inflationary pressures.

The International Monetary Fund (IMF), however, projected a more optimistic 1.6% growth for the UK in 2025. Still, it warned that global economic risks remain “tilted to the downside,” signaling caution for policymakers and investors alike.

Sectoral Imbalance Raises Questions About Stability

Although services and construction provided a temporary lift, the fifth consecutive contraction in the production sector signals structural weaknesses. This trend, if sustained, could undermine long-term growth and challenge the UK’s industrial competitiveness.

Furthermore, with monetary policy now easing and growth projections being trimmed, analysts will closely watch upcoming inflation data and employment figures for signs of a rebound or further slowdown.