UK economy rebounds with 0.3% growth in January easing fears of impending recession

The UK’s economy returned to growth in January, easing fears of an impending recession ahead of the spring Budget next week, official figures show.

The Office for National Statistics (ONS) confirmed that the economy rebounded by 0.3% in January, with entertainment, transport and education helping to drive growth.

It comes after a sharp 0.5% decline in gross domestic product (GDP) in December - a month which was affected by several days of rail and postal strikes and declining output in the entertainment sector, as Premier League football took a break for the World Cup. Looking at the broader picture, GDP was flat in the three months to January as the UK narrowly avoided falling into a recession at the end of last year.

The ONS said the biggest driving force behind the January rebound came from a bounce back in many service sectors affected by strike action, including the transport and storage sector which returned to growth as postal services partially recovered from the effect of December’s strikes.

Other industries like education also drove up GDP as children returned to classrooms, after an unusually high number of absences in the run-up to Christmas, and the ONS also credited the return of Premier League football after the World Cup.

The construction sector declined by 1.7% after being flat in December, which the ONS said could partly be owed to heavy rainfall in the first two weeks of January slowing down building. But housebuilders have flagged a general decline in work recently amid a slowdown in the housing market.

January’s figure beat expectations with analysts predicting that the economy would eke out 0.1% growth in the month. Darren Morgan, ONS director of economic statistics, said: “The economy partially bounced back from the large fall seen in December. Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, showed zero growth.

“The main drivers of January’s growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month. Postal services also partially recovered from the effects of December’s strikes.”

The data comes ahead of Chancellor Jeremy Hunt delivering his spring budget on Wednesday (15 March), which will set out the government’s plan to boost economic growth.

In response to the latest GDP data, Mr Hunt said: “In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go. Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy – so we can improve living standards for everyone.”

Meanwhile, Labour’s shadow chancellor Rachel Reeves said the GDP figures show the economy is “inching along this Tory path of managed decline”. She said: “People will be asking themselves whether they feel better off under the Tories, and the answer will be no. What we need now is the ambition to grow our economy so every part of Britain feels better off, which is what Labour’s mission to secure the highest sustained growth in the G7 will do.”

Foreign Secretary James Cleverly has said ministers would like to see “greater” economic growth than the 0.3% recorded in January. He told Times Radio: “I remember it wasn’t that long ago we were predicted in a heavy recession. Of course we’d like to see greater growth figures than that but there are huge international economic headwinds.

“The Russians’ illegal and unprovoked invasion of Ukraine has pushed up fuel prices, pushed up food prices, these are all having a dragging effect on the UK economy.”