City of London skyline on June 10, 2024 in London, United Kingdom. The City of London is a city, ceremonial county and local government district that contains London’s primary central business district, the CBD. The City of London is widely referred to simply as the City, colloquially known as the Square Mile.
Mike Kemp | In pictures | Good pictures
LONDON – The UK economy grew 0.4% in May, flash figures from the Office for National Statistics showed on Thursday, and the British pound rose to a four-month high against the US dollar after the announcement.
Gross domestic product came in above forecasts for a 0.2% monthly expansion by a Reuters poll of economists.
The British economy emerged from a shallow recession in the first quarter of the year, then flattened in April.
The country’s dominant services sector showed continued growth of 0.3% in May, recovering from output losses in both manufacturing and construction, which rose 0.2% and 1.9% respectively.
Sterling rose 0.05% to $1.2859 against the dollar at 7:17 a.m. in London — the British currency’s highest level since March 8, 2024, according to LSEG data.
A broad-based recovery will be welcomed by the newly elected Labor Party as Prime Minister Keir Starmer heads into his first week in office.
Goldman Sachs upgraded its growth forecasts for the UK last week following a landslide victory for centre-left Labor in the country’s general election. The party campaigned on a platform centered on economic development, housing and planning.
The party’s large parliamentary majority and business-friendly message have led analysts to describe the government as generally supportive of UK assets.
In a note, Ashley Webb, UK economist at Capital Economics, underlined the recent trend in British GDP in recent months – apart from no growth in April – “supports the view that activity is pulling away from dual interest rates and high interest rates. Inflation is starting to ease.”
UK inflation has cooled from a 41-year low of 11.1% in October 2022, hitting the Bank of England’s 2% target in May this year. The performance has raised expectations of an upcoming interest rate cut by the Bank of England.
However, the BOE maintained a cautious tone at its June meeting, even after its peers at the European Central Bank began their own path to interest rate cuts.
It will now be up to the new government to build momentum behind the latest economic growth figures, Munia Barua, deputy chief executive of business campaign group BusinessLDN, said in emailed comments.
“With public finances stretched, ministers should follow up on recent pro-growth announcements and prioritize high-impact, low-cost measures that will help unlock much-needed private investment,” Barua said. Abolition of stamp duty on formation and share transactions.
New finance minister Rachel Reeves said last week Labor would introduce mandatory house-building targets, lift a ban on new offshore wind farms in England and reform planning rules. On Wednesday he announced the launch of a 7.3 billion pound ($9.4 billion) sovereign wealth fund aimed at attracting private sector investment in UK infrastructure projects.
The business community is now awaiting Labor’s first financial report, which is expected before mid-September, Lindsay James, investment strategist at Quilter Investors, said in a note.
James said it should “clarify both taxation and spending plans. This will allow businesses to plan better and re-incentivize the willingness to invest”.
“However, this will take time to feed and until we have a better understanding of what’s to come, we are unlikely to see any meaningful acceleration in GDP,” he added.
