In February, the UK economy confounded expectations with a 0.5% bounce. This growth more than doubled the City economists’ predictions, which were for an increase of just 0.1%. Combined with recent growth, it’s an incredible turnabout. In fact, the economy has contracted in five of the last nine months. January’s first estimate was a modest 0.1% contraction. It then got updated down to no growth, meaning a calmer economic picture than we had thought just a few months ago.
The Office for National Statistics attributed the growth to a variety of factors spanning all sectors, with manufacturing at the head of the pack. This sector experienced an impressive 2.2% boost in output since January, all thanks to substantial advances across many service-producing industries. In particular, metals output jumped 2.1%, transport equipment 1.8%, and pharmaceuticals surged 4.4%. Though recent manufacturing industry resurgence across North America, it followed a decades-long decline. That resilience helped fuel much of the overall economic growth.
Alongside manufacturing, consumer-facing services played a role in these encouraging economic outcomes, growing 0.7% month-on-month. This was especially true among the areas of computer programming, telecommunications and automobile dealerships.
Even with all the positive numbers, Capital Economics analysts advised against jumping to overly rosy conclusions based on the stats. They specifically cautioned that, although the short-term outlook does seem more promising, it’s important to step back and think about the larger picture. The firm remarked that “the big picture” shows the UK economy’s recovery remains fragile, and it is challenging to foresee significant strengthening moving forward.
The threat from global trade tensions hangs heavy over the UK’s economic outlook. Recent trade battles have perhaps reached a new height, with the US targeting Canada, Mexico — and now steel. Yet, these developments are likely to weigh on growth prospects. The Resolution Foundation thinktank recently expressed dismay at the economic reversal. They warned that the trend may not be sustainable as the country heads into spring and summer.
And indeed, government chief whip Mel Stride has been expressing his scepticism on Labour’s plans for stimulating economic growth. He stated, “Since coming to office, Labour’s choices have killed growth stone-dead and there is still a long way to go to recover.” He said that stability of Government was key to helping investor confidence and helping lay out long-term economic plans.
On the flip-side, Rachel Reeves called out the government’s awful record on making sensible decisions in the public interest while chasing after bad trade deals. She urged that the government continue to be evidence-based and level-headed. Their goal should be to get the best deal with the United States that’s in our national interest. We’ll be spending our days and nights figuring out how to incite some serious economic development. Our mission is to bring security to working people and to rebuild Britain.
Simon Pittaway, of Capital Economics, said it would be difficult to maintain that momentum in the face of escalating tariffs and global economic uncertainty. He noted that “it is questionable whether this momentum will last.”
The UK is charting a far more contentious course. Either way, observers and policymakers are keenly interested to see whether this growth is sustainable or whether external pressures will stifle momentum.