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UK economy exits recession as GDP rises 0.6% in first quarter – what it means for your money
Read below to find out how this will affect your finances
THE UK is officially out of recession as figures reveal the economy grew 0.6% for the first three months of the year.
It was the strongest rate of quarterly growth for Gross Domestic Product (GDP) since the end of 2021, the Office for National Statistics (ONS) said.
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Rishi Sunak said: "The economy has turned a corner. Today's news proves that.
"We know things are still tough for many people, but the plan is working, and we must stick to it."
Economists have predicted that it would grow 0.4%, so the figures are better than expected.
The downturn came to an end due to improvements in the services and production sectors, which grew by 0.7% and 0.8% respectively.
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ONS director of economic statistics Liz McKeown said: "After two quarters of contraction, the UK economy returned to positive growth in the first three months of this year.
"There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well.
"Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction."
It follows two-quarters of GDP contracting between July and December last year.
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The UK economy shrank by 0.3% in the last three months of 2023 meaning the UK tipped into a technical recession, defined as two or more quarters in a row of falling Gross Domestic Product (GDP).
However, experts said the recession was considered "mild" compared to others in recent history.
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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 news comes just a day after the Bank of England left interest rates unchanged for the sixth consecutive time.
Decision-makers on the Bank's Monetary Policy Committee (MPC) left the base rate at a 16-year high of 5.25% yesterday.
High street banks and lenders use the Bank of England (BoE) base rate to set the interest rates it offers customers on mortgages, loans and savings.
The CPI measure of inflation fell to 3.2% in March - down from 3.4% in February and the lowest since September 2021.
However, the BoE now expects inflation to fall below its 2% target by June and could eventually drop to 1.5% in 2026.
It also predicts that the economy will grow by 0.2% in the second quarter of this year, helped by the government's cut to national insurance and boost to child benefit payments.
It means that analysts and investors now believe that interest rates have the potential to fall as early as June.
MUCH NEEDED BOOST FOR RISHI
ANALYSIS by Jack Elsom, Chief Political Correspondent:
After a tough week for Rishi Sunak, finally some good news.
Britain is now officially out of recession after the economy grew by 0.6% in the last three months.
It might not seem much, but it is growth higher than most boffins had expected and firmly puts us back in the black.
The PM could not have been quicker to herald the stats as “proof” the country has “turned a corner” thanks to his efforts.
“We know things are still tough for many people, but the plan is working, and we must stick to it,” he said this morning.
For a man who regards economic competency as a key pillar of his electoral appeal, the fact Britain was in recession was a drag anchor around his neck.
Although the downturn was brief and shallow, it was a label Sunak was desperate to shake off.
This morning he now has, and it is a much-needed boost at a time when he has spent more time on his back foot than his front.
Bruising local election results followed by another Tory defection forced him onto the ropes.
Now expect him to come out swinging and once again talking about the economy - the battleground where he is most comfortable.
Labour says a government “victory lap” is ridiculous given people still do not feel better off.
For many millions of Brits, that will ring true.
But Sunak now has a message to sell that things are on up. Inflation is coming down, growth is creeping forwards.
Many strategists still regard Bill Clinton’s “it’s the economy stupid” as political law - that if people feel better off they will reward the party responsible.
Sunak's challenge now is to turn the economic results into political results - and that remains to be seen.
What it means for your money
This is good news, not just for the economy but for your finances too.
GDP is a measure of the economic output of companies, individuals and governments.
It's also a measure of how healthy and prosperous an economy is.
Yael Selfin, chief economist at KPMG, said: "We expect to see continued growth for the rest of this year, supported by a more favourable economic backdrop.
"Falling inflation and real pay increases should help repay some of the damage to household incomes and support household's consumption."
Jeremy Hunt, the chancellor, said: "There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic."
A healthy economy usually means lower inflation, rising employment, less poverty, and more money in your pocket.
Lower inflation is good because it means prices don't rise as fast, putting less financial pressure on households.
However, some experts warn households are still under immense pressure.
Joseph Rowntree Foundations economist, Rachelle Earwaker, said: "At a time when millions of households in the UK are grappling with daily hardships, forced to choose between essentials like warmth and food, it’s simply not good enough to just focus on GDP growth.
"With the nation now enduring a second lost decade of living standards, politicians must engage with the severity of the situation.
"People's bills don't suddenly come down, or their income suddenly rise with a single quarter of slightly stronger than expected GDP growth.
"The complex struggles of families cannot be captured by small fluctuations in output, and for millions of low-income households, the economic burden is as acute as ever."
How to protect your finances
Despite GDP growing, you might still be feeling the pinch from the higher cost of living.
But there are ways you can keep your cash safe.
Make sure you go through all your bank statements and accounts so you know what your income and outgoings are every month.
You can save money by moving to a cheaper mobile phone tariff or by axing subscriptions you don't need like Netflix or Amazon Prime.
If you've got any outstanding debts, don't ignore them as it will only make your financial situation worse.
Stay on top of what you owe and always repay priority debts.
There are plenty of organisations where you can seek debt advice for free.
You should also check what benefits you are eligible for as you might be able to claim without realising.
Are you missing out on benefits?
YOU can use a benefits calculator to help check that you are not missing out on money you are entitled to
Charity Turn2Us' benefits calculator works out what you could get.
Entitledto's free calculator determines whether you qualify for various benefits, tax credit and Universal Credit.
MoneySavingExpert.com and charity StepChange both have benefits tools powered by Entitledto's data.
You can use Policy in Practice's calculator to determine which benefits you could receive and how much cash you'll have left over each month after paying for housing costs.
Your exact entitlement will only be clear when you make a claim, but calculators can indicate what you might be eligible for.
There is also emergency funding available for struggling households, which is dished out by local councils.
The Household Support Fund is designed to help those on a low income or benefits cover the cost of food, energy and general living costs.
What help is available varies depending on where you live as each council sets it own eligibility criteria.
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It's worth getting in touch with your local authority to see what you might be able to get.
You can find what council area you fall under by using the government's council locator tool online.