UK economy returns to growth as GDP rises 0.3% – what it means for your money
THE UK economy returned to growth and preformed better than expected, the latest official figures show.
Gross domestic product (GDP) rose by 0.3% in November after falling by 0.3% in October.
A healthy economy is one where GDP is growing but if it stalls or is falling, it's bad news for businesses and consumers.
The latest data from the Office for National Statistics (ONS) showed the uplift was driven by the services sector, which rose by 0.4% during the month, and was the biggest contributor to economic growth.
Services output grew by 0.4% in November 2023 and was the main contributor to the monthly growth in GDP; this follows a fall of 0.1% in October 2023.
Production output grew by 0.3% in November 2023, following a fall of 1.3% in the previous month.
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The construction sector fell by 0.2% in November 2023 after a fall of 0.4% in October 2023.
Economists had been expecting GDP to rise by 0.2%, so the figure for November is better than expected.
But GDP is estimated to have fallen by 0.2% in the three months to the end of November 2023.
That's more than the 0.1% fall expected over the longer period of time.
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ONS’s chief economist Grant Fitzner said: “The economy contracted a little over the three months to November, with widespread falls across manufacturing industries, which were partially offset by increases in public services, which saw less impact from strike action.
“GDP bounced back in the month of November, however, led by services with retail, car leasing and computer games companies all having a buoyant month.
“The longer-term picture remains one of an economy that has shown little growth over the last year.”
If GDP drops for two consecutive quarters it is defined as a recession, which leads to job losses and wages stalling.
The UK last went into recession in 2020 after the coronavirus pandemic hit, shutting down large parts of the economy.
GDP fell 0.1% in the three month from July to December.
If the economy fails to grow in December or shows no growth, then it could signal the UK has entered recession.
Yael Selfin, chief economist at KPMG UK said: "The economic outlook currently remains gloomy, with a technical recession still potentially on the cards in the second half of 2023, especially given the expected impact from the industrial action in December.
"Nonetheless, even if the economy manages to avoid a recession, it is expected to remain in stagnation territory.
"Manufacturing recovered somewhat after it was hit by the impact of high interest rates and weakening global economic activity, while construction is experiencing difficulties from a slowdown in housebuilding.
"The hope is that the outlook ahead will brighten as mortgage rates continue to fall, improving affordability dynamics.
"The second half of the year could see fortunes changing for the UK economy, with inflation expected to continue to normalise.
"This could raise the prospect of earlier interest rate cuts, with the Bank of England likely to be wary about the risk of overtightening given the weak economic backdrop.”
Chancellor of the Exchequer Jeremy Hunt said that while November's growth was "welcome news" economic growth "will be slower" as the government aims to get inflation back to its target of 2%.
He said: “But we have seen that advanced economies with lower taxes have grown more rapidly, so our tax cuts for businesses and workers put the UK in a strong position for growth into the future."
The Bank of England has kept the base rate, a lever used to control inflation, at 5.25% in its last two meetings.
But while the measure is designed to control inflation, it also discourages people from spending, which can have a negative impact on GDP.
What does it mean for my money?
A healthy economy is one that is growing and not in recession.
A recession occurs if there are two consecutive quarters of GDP falling, the year is split into four three-month quarters.
Recessions are bad news because it usually means jobs will be lost and wages will stall.
It can cause businesses to go into administration or bust too.
This, in turn, means the government gets less tax, which could mean cuts to public services and benefits such as Universal Credit. Tax rates might go up too.
How to protect your finances
There are things you can do to try and protect your cash if you are worried about your finances.
Having an emergency savings pot is helpful in times of inflation as this will help to cover any outgoings or unexpected increases.
It is also a good time to shop around for better deals on things such as car insurance, broadband and your mobile phone.
When money is tight it can be tempting to ignore debts - but this will only make things worse.
Stay on top of what you owe and always repay priority debts.
If you are struggling with your bills you should also reach out to you supplier and see what help they have on offer.
There are also plenty of organisations where you can seek debt advice for free.
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These include:
- National Debtline - 0808 808 4000
- Step Change - 0800 138 1111
- Citizens Advice - 0808 800 9060