UK Economy Shows Signs of Recovery, Exiting Recession

Recent analysis by Lloyds Bank suggests that the UK economy likely emerged from recession at the start of this year, with growth gaining momentum across several key sectors. Read more: UK Economy Shows Signs of Recovery, Exiting Recession

May 9, 2024 - 13:27

UK Economy Shows Signs of Recovery, Exiting Recession

A booming mortgage market and an economic recovery that made it less likely that Covid-hit borrowers would default on loans helped Lloyds Banking Group double its profits in the three months to September.

Recent analysis by Lloyds Bank suggests that the UK economy likely emerged from recession at the start of this year, with growth gaining momentum across several key sectors.

According to Lloyds Bank figures, more than half of the sectors within the UK economy experienced growth in the first quarter of the year. Notably, services businesses, which contribute around 70% of the UK’s economic output, showed strong growth. Sectors such as software services, financial services, and real estate saw significant expansion, surpassing the threshold for growth.

Although manufacturing businesses trailed behind, certain sub-sectors such as food and drink, chemicals, household products, and industrial goods recorded robust activity.

The research indicates that the Office for National Statistics (ONS) is likely to confirm the end of the recession with the release of new GDP data on Friday. City analysts anticipate a 0.4% growth in GDP for the first quarter, following contractions in the third and fourth quarters of last year.

Nikesh Sawjani, senior UK economist at Lloyds Bank, emphasized the role of slowing inflation and rising demand in driving growth in the first quarter, expressing hope for continued momentum.

However, despite signs of recovery, growth in the UK economy is expected to remain sluggish compared to historical standards. The Organisation for Economic Co-operation and Development (OECD) forecasts modest growth for the UK economy in the coming years, with challenges such as high interest rates and inflation constraining households and businesses.

The Bank of England’s Monetary Policy Committee (MPC) is expected to maintain borrowing costs at their meeting on Thursday, although some analysts anticipate a quarter-point rate reduction in the future to address inflationary pressures and support economic growth. Financial markets anticipate potential rate cuts later in the year, reflecting expectations of a cautious approach by the central bank.