UK economy grows in January as GDP increases by 0.2% – what it means for your money

THE UK economy has returned to growth, the latest figures show.

Gross Domestic Product (GDP) rose by 0.2% in January this year, following a fall of 0.1% in December.

The UK economy grew in the month to January, latest figures showCredit: Getty

The rise was partly due to growth in the services and construction sectors, the Office for National Statistics (ONS) said.

The economy picked up due to strong growth in the retail and wholesaling sectors as well.

Responding to the latest GDP figures, Chancellor Jeremy Hunt said: “While the last few years have been tough, today’s numbers show we are making progress in growing the economy.

“But if we want the rate of growth to pick up more we need to make work pay which means ending the unfairness of taxing work twice."

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It follows two quarters of GDP contracting between July and December last year.

The UK economy shrank by 0.3% in the last few 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).

It came after figures for January revealed the economy contracted by 0.1% in December.

But experts said the recession was considered "mild" compared to others in recent history.

Christopher Breen, an economist for the Centre for Economics and Business, said the downward turn may not have extended beyond two quarters.

Following today's figures, Alice Haine, personal finance analyst at Bestinvest, said the UK was taking its "first tentative steps out of recession".

This would raise hopes the "country's downturn will be short-lived and shallow", she said, in a boost for households and the government.

She added: "The hope from here is that January’s slightly more promising GDP figure, largely driven by a strong performance in the services sector with upbeat retail sales volumes helping to offset the steep drop in December, will energise the economy and set it on the road to recovery pushing any recession talk firmly into the rear-view mirror."

What it means for your money

GDP is a measure of the economic output of companies, individuals and the UK government.

It's also a measure of how healthy and prosperous an economy is.

So if GDP is growing, that's good news for the everyday household and their wallet or purse.

If GDP is going up, it generally means people pay more in tax because they're earning and spending more.

This means more money for the government who can spend the extra cash on public services such as schools and hospitals.

When the economy shrinks, this can go in reverse, meaning households see their standard of living drop.

If GDP falls, it means businesses struggle and may lay off staff from work as well.

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.

Of course, there are bills that you can't avoid paying - but that doesn't mean you can't cut back in other ways.

For example, 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, the worst thing to do is 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 also 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.

Entitledto's free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.

If you don't want to register, consumer group moneysavingexpert.com and charity StepChange both have benefits tools powered by Entitledto's data that let you save your results without logging in.

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.