Economists had been largely expecting a contraction of 0.1% for the three month period following a zero growth reading for the previous three months to September. The risk of shallow recession is still looming large because the margins between contraction and growth are so tight that future revisions may tip the balance either way. The wider ONS data showed that a separate measure for living standards, GDP by head of population, had contracted for two consecutive quarters.
The figures maintain intense pressure on the government as it has made achieving economic growth its priority for the parliament. Its term did not begin in a way that would bolster business and consumer confidence.
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Prime minister Sir Keir Starmer and his chancellor were accused of an own goal last summer after warning of a tough budget ahead to bolster dire public finances. While October's measures were aimed at sparing pain from working people, companies argue that hikes to employer National Insurance contributions from April will knock investment, force job cuts, and impact pay rises.
That backdrop is made more painful by the fact that inflation is on the increase again, with a slew of essential bills including those for water, energy and council tax all set to rise sharply in the spring too. At the same time as the domestic difficulties, global growth is also being challenged by Donald Trump who had threatened at the time of his election victory that universal trade tariffs were imminent.
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New projections from the Bank of England last week made for sobering reading, with inflation expectations for this year hitting 3.7% from the current 2.5%. Growth, the forecast suggested, would come in at 0.75% for 2025. In November, the Bank had expected a figure double that sum. A lack of growth is a problem for chancellor Rachel Reeves as it typically hits potential tax receipts at a time when her budget rules over the public finances are already under strain. It emerged on Wednesday that the Treasury had ordered a leak inquiry following a Bloomberg report that updated Office for Budget Responsibility forecasts sent to ministers had downgraded UK growth expectations. Ms Reeves said of the ONS data: "For too long, politicians have accepted an economy that has failed working people. I won't. "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."
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