UK is back to growth after one of shortest slumps

The British economy surged back to growth in a major boost to Prime Minister Rishi Sunak just a week after the Conservatives suffered local election drubbing across the country. After one of the shortest recessions on record, official figures showed GDP rose by a stronger than expected 0.6pc in the first three months of this year.

Head of financial analysis at broker AJ Bell, said: “The UK has charged out of what will go down in the history books as the shortest recession on record. After months of floundering around a flatline growth of 0.6pc will give the UK economy a real confidence boost.” The figures suggested the economy may finally be gaining some momentum after years of slow growth as it emerged from the shallow recession at the end of 2023. It was a surprise in the financial district of London and sent the FTSE 100 index of leading shares powering to an all-time high. The blue chip index stood at 8,442 up around 60 points.

This announcement last week, showed the key Services sector, which accounts for 80pc of output, growing at 0.7pc between January and March, while the production sector, which includes manufacturing, was 0.8pc higher but construction fell by 0.9pc.

In a note entitled ‘Finally a good news story for the UK’, the economics team at Japanese bank Nomura said: “This seems to be genuinely strong numbers. With some GDP releases it is possible to point to a few volatile factors driving the strength or weakness, however, with this release it looks like the fundamentally most important factors were all positive.” Crucially “real GDP per head” increased by 0.4pc in the first quarter following seven consecutive quarters without positive growth. Chancellor Jeremy Hunt seized on the upbeat economic data and floated the prospect of interest rate cuts which would be a “massive relief to families with mortgages”, more pre-election tax cuts, and sought to argue that a Labour government would mean French-style higher unemployment.

Hunt said on radio: “What’s encouraging about these figures is that we have actually grown faster not just than France or Germany but faster than the United States as well.” But shadow chancellor Rachel Reeves said: “This is no time for Conservative ministers to be doing a victory lap.

“Prices are still significantly higher in the shops, families are paying hundreds of pounds more on monthly mortgage bills, and the economy is forecast to grow by just one per cent next year.” Liberal Democrat Treasury spokeswoman Sarah Olney added: “If Rishi Sunak thinks hard-hit households will be celebrating today, he is even more out of touch than we thought.” The figures come after the Bank of England (BoE) last week, once again left its main rate at 5.25pc, amid growing hopes in the City (the financial district) of a cut in June. With a general election set for the autumn, Hunt said he could foresee interest rates cut this year. He said: “The Bank of England governor says he is optimistic that we are on the right track.” But the economics director at the Institute of Chartered Accountants in England and Wales, Suren Thiru said: “The strong exit from recession may inadvertently keep UK interest rates higher for longer by giving those policymakers still worried about underlying inflationary pressures enough comfort on economic conditions to continue putting of cutting interest rates.” The BoE’s monetary policy committee slightly upgraded its forecast for GDP growth in 2025 and said inflation, 3.2pc in March, will be below its two per cent inflation target through 2026 and 2027. The economic news came after the Conservatives lost nearly 500 councillors in the May 2 local elections.