UK economy grew at end of 2024 as GDP rose 0.1% – what it means for your money

THE UK economy showed some growth in the final quarter of last year after better-than-expected expansion in December, according to official figures.

The Office for National Statistics (ONS) said gross domestic product (GDP) edged 0.1% higher between October and December, following no growth in the previous three months.

The ONS estimated that the economy expanded by 0.4% in December, which is better than most analysts expected, and marked a pick up following a 0.1% rise in November and a 0.1% fall in October.

The fourth quarter figures means the economy grew by 0.9% overall in 2024.

GDP is one of the main indicators used to measure the performance of a country's economy.

When it goes up, it means the economy is doing well, when it falls it means the economy has shrunk.

GDP increased largely due to the services sector, which rose by 0.2% in the final quarter.

Meanwhile the production sector shrank by 0.2%, offset by construction, which grew by 0.5%.

It's worth bearing in mind, that the GDP figures published by the ONS today are estimates and may be revised up or down in the future.

Chancellor Rachel Reeves vowed not to accept an "economy that has failed working people".

Chancellor Rachel Reeves said: "After 14 years of flatlining living standards, we are going further and faster through our plan for change to put more money in people’s pockets.

"That is why we are taking on the blockers to get Britain building again, investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand."

What is the Bank of England base rate and how does it affect me?

What it means for your money

GDP measures the economic output of companies, individuals and Governments.

If it is rising steadily, but not too much, it's a sign of a healthy and prosperous economy.

This is because it usually means people are spending more, the Government gets more tax and workers get better pay rises.

It also generally means lower inflation as companies don't have to hike their prices to cover shortfalls in their coffers.

The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.

This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.

Usually, when inflation is low, the BoE cuts interest rates to try to speed the economy up.

However, the Government's decision to increase employer National Insurance contributions (NICs) from 13.8% to 15% in April has raised fears inflation could rise and dampen GDP.

This is because there are expectations businesses won't be able to absorb the costs and will pass this on to consumers which will see prices rise.

Inflation, which tracks the rate at which prices rise across the economy, has significantly declined to 2.5% per year compared to the highs of recent years.

However, concerns are emerging that it may be starting to rise once again.

At the same time, economic growth in the UK remains sluggish.

The Bank of England has said it expects the UK economy to grow by 0.75% in 2025, down from a previous forecast of 1.5%, before accelerating in 2026.

Lowering the base rate is intended to encourage greater spending and investment, providing a much-needed boost to the economy.

However, the Bank's forecasts now suggest inflation is rising again, to a higher-than-expected peak of 3.7% later in the summer.

This could lead to the BoE not cutting interest rates as much as previously thought and could mean households' money not going as far as before.

Money markets now anticipate that interest rate cuts will proceed more cautiously than previously expected.