The British economy bounced back strongly in the first three months of the year, bringing to an end to what economists termed a “technical recession”, official figures showed Friday.
The Office for National Statistics said the economy grew by 0.6% in the first quarter from the previous three-month period, with broad-based strength across the crucial services sector in particular.
The increase was higher than the 0.4% predicted by economists and the strongest since the fourth quarter of 2021 when the economy was rebounding following the sharp contraction during the coronavirus pandemic.
It comes after two quarters of modest declines, which in the U.K. is defined as a recession.
Despite the quarterly increase, the British economy has barely grown over the past year. It has been hobbled by interest rates at 16-year highs of 5.25%.
There was hope Thursday that they may be on the way down soon. Bank of England Gov. Andrew Bailey indicated that a rate cut may be on the cards in June if inflation continues to trend downwards.
The Bank of England, like the U.S. Fed and other central banks around the world, raised interest rates aggressively in late 2021 from near zero to counter price rises first stoked by supply chain issues during the coronavirus pandemic and then by Russia’s invasion of Ukraine.
High interest rates — which cool the economy by making it more expensive to borrow — have helped ease inflation, but they’ve also weighed on the British economy.
Economists laid out the hope that, with inflation cooling and interest rates lower, the British economy may be entering a period of more sustained growth. However, it’s not expected to be particularly strong, with the Bank of England predicting only 0.5% growth this year.
“This is a surprisingly strong recovery and a likely turning point for the economy,” said Debapratim De, director of economic research at Deloitte.
Lawmakers in the U.K.’s governing Conservative Party, which appears headed for a big electoral defeat later this year to the Labour Party, will be hoping that the economy is set fair, relieving the pressure on financially stretched households, thereby helping to fuel an economic feelgood factor.
“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,” said Treasury chief Jeremy Hunt.
His counterpart in Labour, Rachel Reeves, said this is “no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good.”
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