UK living standards decline as GDP per head falls
The depressing fact from this morning’s growth report is that UK living standards, as measured by GDP per capita, have fallen for two years running.
As flagged at 7.15am, GDP per head fell in the second half of 2024, and in each quarter in 2023.
That means that the increase in activity was more than outpaced by increased population, indicating that individuals won’t actually feel any benefit from growth in the economy, such as the 0.1% rise in GDP in Q4 2024.
Sam Miley, managing economist and forecasting lead at the Cebr thinktank, says this highlights the “poor conditions” faced by the UK economy:
“The UK economy returned to growth in Q4, surpassing expectations with an expansion of 0.1% on the quarter. Though welcome news, this feeble rate of growth is still evidence of a weak trajectory, which is expected to persist into 2025.
Q4’s figures take full year growth for 2024 to 0.9%, marginally above Cebr’s forecast of 0.8%. However, in a further sign of the poor conditions facing the UK economy, GDP per capita fell by 0.1% over this period. This metric has now fallen for two consecutive years, suggesting declining living standards.”
Simon French, chief conomist at Panmure Liberum, says this is the crucial measure for the government to improve:
This is the chart that requires the turnaround – UK GDP per capita has fallen for six of the last eight quarters, under governments of both shades. There will be little electoral credit for growth until this inflects higher. pic.twitter.com/x3ysG0HDPI
— Simon French (@Frencheconomics) February 13, 2025
It is worth noting that almost all the economic evidence suggests that after a large inward migration surge like the one the UK has experienced since Brexit, GDP per capita will be depressed given a large denominator effect. But the medium term outlook is more rosy given what we… https://t.co/SoArwlT04X
— Simon French (@Frencheconomics) February 13, 2025
And here’s Sandra Horsfield, economist at Investec, on the fall in GDP per head:
In calculating these figures, the ONS took on board new, higher, population estimates that incorporate more net migration into the UK.
Indeed, on a per-capita basis, GDP fell by 0.1% in 2024 after a 0.9% decline in 2023. Whereas this is by no means a perfect gauge of living standards, it illustrates that momentum is still lacking.
Key events
Neil Baylis, a competition Partner with law firm CMS, questions whether the CMA can really change its approach to regulation to wave more mergers though.
Baylis says:
“The question is, will the CMA be comfortable clearing transactions that previously would have been blocked or only cleared subject to commitments?
“The statutory test has not changed. If the CMA becomes too lenient it risks being challenged by third parties who may not be so pleased to see anti-competitive transactions go through.
Baylis also points out that the recent moves have been to beef up the CMA’s powers, not water them down:
“It is also worth noting that there is a huge expansion in CMA powers thanks to the DMCC Act which is allowing the CMA to regulate big tech properly for the first time. The CMA’s competition investigatory powers have also been enhanced. These changes were proposed by the last Government and pointed to a more intense enforcement environment, not a lighter touch.”
Ed Conway of Sky News has analysed today’s UK GDP report, to show how much ground the economy has lost since the financial crisis:
Here’s a much better way of looking at the GDP data👇
If economic growth had kept growing as it had before the 2008 crisis the economy would be 23% bigger than it is today.
This is our big problem: years of sub-par growth and economic disappointment vs what we were once used to pic.twitter.com/JDfa9oH1Rx— Ed Conway (@EdConwaySky) February 13, 2025
Look at GDP per head – a better measure of living standards – and the picture is worse still.
As of the latest quarter, GDP per capita was still smaller than it was in early 2019.
So that’s five and a bit years of lost growth pic.twitter.com/oOWz6RFrIR— Ed Conway (@EdConwaySky) February 13, 2025
Anger over Barclays CEO’s bumper pay packet
Luke Hildyard, executive director of the High Pay Centre, a think tank focused on pay, corporate governance and responsible business, has hit out at the bumper pay package handed to Barclays’ CEO CS Venkatakrishnan and high-paid investment bankers.
Hildyard says:
“The £10m pay out for the Barclays CEO and the £1.2 billion spent on a few hundred investment bankers epitomise the inequality in the UK economy. Excess at the top contrasts with much wider hardship across a country plagued by stagnant growth and the aftermath of the cost of living crisis.
The £770,000 average bonus paid to 837 investment bankers is over 1,500 times the value of the £500 share award given to 90,000 Barclays employees. So for every £1,546 paid to an investment banker, an ordinary employee like a bank cashier or call centre operative or administrative worker got a quid!
It would cost Barclays about £45m to give £500 to 90,000 staff – increasing that tenfold would still equate to less than half the value of the £1.2bn spent on the pay of 800 investment bankers, or about 6% of Barclays £8bn profits.
While ordinary employees will welcome the shares, the UK government should do more to give workers more of a stake and voice in UK companies.”
Alongside the bumper package for its CEO, Barclays made multimillion-pound payouts to its highest-earning bankers, with 762 receiving more than €1m (£833,400) in 2024.
Documents released alongside the Barclays annual report show that 35 were paid more than €5m each, while one unidentified banker took home more than €17m (£14m), which is a third more than the chief executive’s pay packet.
Jambu Palaniappan, boss of Checkatrade, is concerned by the UK’s push today to make its regulators do more to support growth.
Palaniappan says:
“As a son of Silicon Valley myself, even I’m willing to question whether we want a handful of vast American firms calling the shots.
So while regulators should heed the call to catalyse growth, there are many British scale-ups keenly watching the CMA under its new ex-Amazon chair for early signals as to whether they will continue to use their powers to promote competition and consumers across digital markets.”
CMA unveils proposals to ‘drive growth, investment and business confidence’
Britain’s competition regulator has responded to the government’s urging to support the economy, by proposing new measures to drive growth, investment and business confidence.
Shortly after business secretary Jonathan Reynolds announced a new ‘strategic steer’ for the Competitions and Markets Authority, CMA chief Sarah Cardell has responded by promising “a package of carefully considered proposals for rapid change”.
This follows the pressure being piled on regulators by ministers to do more to support the economy, rather than blocking deals that could help growth.
Cardell starts by defending the CMA’s work, pointing out:
A robust, independent competition regime should both drive growth and investment, and uphold consumer interests.
That addresses worries that regulators risk harming the economy in the long run by not holding businesses to account (everyone remembers the financial crisis, right?).
But she also acknowledges the importance of persuading companies and investors that the UK is a great place to do business.
And Cardell says the CMA’s new strategy will focus on four Ps – ‘pace’, ‘predictability’, ‘proportionality’ and ‘process’.
On ‘pace’, she says the CMA will streamline and speed up its decision-making process when considering whether to allow a deal.
‘Predictability’ will see the CMA clarify how it interprets and applies its tests on whether a takeover should be reviewed.
On ‘proportionality’, Cardell says:
Our objective is for as many of the deals as possible which raise competition concerns to be cleared with effective remedies, rather than be prohibited.
And she also suggests the regulator will take “a proportionate approach to looking at global deals”, so might watch to see if other regulators will address the UK’s concerns rather than trying to amend or block a deal themselves.
For the fourth P, ‘process’, Cardell is promising a new ‘mergers charter’ to help investors understand the regulators work, which will be published in March.
She writes:
The charter will include our firm public commitment to pace, predictability, proportionality and process, as well as laying out what will be needed – from the CMA, businesses and advisors – to ensure the success of this new approach.
Reminder: The CMA’s chairman was forced out last month after ministers concluded that the regulator has not convinced them that it was focused enough on growth.
Trump: Today Is The Big One: Reciprocal Tariffs!!!
Tin hats on!
Donald Trump has reportedly posted that ‘TODAY IS THE BIG ONE: RECIPROCAL TARIFFS!!” – signalling he will hike levies on countries who impose larger tariffs than the US on trade.
Train drivers on London’s Elizabeth Line to strike
The Labour government had been hoping to spur growth by ending the various industrial disputes that dogged the later days of their Conservative predecessors.
But those hopes could be dashed by news that train drivers who are members of the ASLEF trade have voted to go on strike on the Elizabeth line in London.
Drivers will walk out on 27th February, 1st March, 8th March and 10th March from 00:01 to 23:59., Aslef say.
Mick Whelan, ASLEF’s general secretary, explains:
“Our members have been instrumental in the success of the Elizabeth line – it’s a partnership, in practice, between the company and its employees – but, despite our best efforts, MTR has decided not to recognise the input, the importance, and the value of train drivers in this success.’
Drivers voted “overwhelmingly” for industrial action, Aslef adds, with 95% voting yes on a turnout of 88%.
Here’s a clip of Rachel Reeves discussing today’s GDP report:
Barclays CEO’s pay more than doubles; defends DEI policies
Kalyeena Makortoff
The pay of Barclays’ chief executive has more than doubled to £10.5m, as a rebound in investment banking and steady interest rates helped push the UK bank’s annual profits up by almost a quarter.
CS Venkatakrishnan’s payout is one of the largest for a Barclays boss, having risen from £4.6m a year earlier in 2023.
Barclays CEO also defended the bank’s DEI policy amid the US rollback, telling media on Thursday morning:
“This company and our management team and I have an enduring commitment to a culture of inclusivity in the bank, and it’s enduring and unwavering. And we want to ensure that this organization is meritocratic. It’s a place where people can start their careers, excel, have the opportunities to develop, to broaden themselves and to spend a long time here in a fulfilling way.
What that means, if you want to get the very best people is, by necessity, you get a very diverse workforce. We want to provide equality of opportunity, and we want to create that inclusive environment in which people really can shine, excel and contribute to this bank. So that’s that’s our approach, and we will continue to run the business and run the company in that way”
Digging into the detail of today’s GDP report, you can see that growth in Q4 was driven by an increase in inventories – ie, companies stockpiling raw materials and parts.
That made up for falls in net trade and gross fixed capital formation (ie, spending on assets) in the October-December quarter.
ING developed markets economist, James Smith, explains:
The UK economy grew by 0.1% in the final quarter of 2024, though only because of a surge in inventories. These are a notoriously volatile accounting fixture which, unlike other parts of the GDP breakdown, don’t tell us much about the underlying health of the economy.
The areas that do – household consumption, exports, and business investment – were all flat or negative. The latter was a particular disappointment, falling by more than 3% in Q4, having outperformed many other economies earlier in the year.
UK pushes competition regulator to support growth
The UK government has just released new strategic guidance for its competition watchdog, stating that the regulator should support growth and investment, as part of the push to grow the economy.
The ‘strategic steer’ states that the Competition and Markets Authority’s (CMA’s) actions should be “swift, predictable, independent and proportionate”, to support growth and investment.
The document says the CMA should use its tools “proportionately, with growth and investment in mind”.
That means:
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prioritising pro-growth and pro-investment interventions
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focusing on markets and harms that particularly impact UK-based consumers and businesses
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supporting growth and international competitiveness in the industrial strategy’s 8 key sectors
The CMA is also being instructed to “minimise uncertainty” by engaging with those affected by its work, and to engage with the government to find ways to support its growth agenda.
This new ‘steer’ comes less than a month after the government forced out the CMA’s chair, Marcus Bokkerink.
Business secretary Jonathan Reynolds is presenting the new strategy now:
Business Secretary Jonathan Reynolds speech on competition watchdog reform.
But also takes a swipe at growing threat from Reform.
“I don’t believe in the snake oil of the extreme..the siren song from the fringes of our politics” pic.twitter.com/kDNcdZP07t— Ashley Armstrong (@AArmstrong_says) February 13, 2025
Reynolds says CMA overhaul will include reform of merger control process.
But says he’s not satisfied with other regulators “it’s not enough..watch this space”— Ashley Armstrong (@AArmstrong_says) February 13, 2025
Make Work Pay changes: Won’t come in sooner than Autumn 2026. Probation period preference for 9 months (Rayner wanted much shorter). Reynolds says lighter touch for dismissal in early days of employment – after companies pushed that it would make it harder to take risks on jobs
— Ashley Armstrong (@AArmstrong_says) February 13, 2025
UK living standards decline as GDP per head falls
The depressing fact from this morning’s growth report is that UK living standards, as measured by GDP per capita, have fallen for two years running.
As flagged at 7.15am, GDP per head fell in the second half of 2024, and in each quarter in 2023.
That means that the increase in activity was more than outpaced by increased population, indicating that individuals won’t actually feel any benefit from growth in the economy, such as the 0.1% rise in GDP in Q4 2024.
Sam Miley, managing economist and forecasting lead at the Cebr thinktank, says this highlights the “poor conditions” faced by the UK economy:
“The UK economy returned to growth in Q4, surpassing expectations with an expansion of 0.1% on the quarter. Though welcome news, this feeble rate of growth is still evidence of a weak trajectory, which is expected to persist into 2025.
Q4’s figures take full year growth for 2024 to 0.9%, marginally above Cebr’s forecast of 0.8%. However, in a further sign of the poor conditions facing the UK economy, GDP per capita fell by 0.1% over this period. This metric has now fallen for two consecutive years, suggesting declining living standards.”
Simon French, chief conomist at Panmure Liberum, says this is the crucial measure for the government to improve:
This is the chart that requires the turnaround – UK GDP per capita has fallen for six of the last eight quarters, under governments of both shades. There will be little electoral credit for growth until this inflects higher. pic.twitter.com/x3ysG0HDPI
— Simon French (@Frencheconomics) February 13, 2025
It is worth noting that almost all the economic evidence suggests that after a large inward migration surge like the one the UK has experienced since Brexit, GDP per capita will be depressed given a large denominator effect. But the medium term outlook is more rosy given what we… https://t.co/SoArwlT04X
— Simon French (@Frencheconomics) February 13, 2025
And here’s Sandra Horsfield, economist at Investec, on the fall in GDP per head:
In calculating these figures, the ONS took on board new, higher, population estimates that incorporate more net migration into the UK.
Indeed, on a per-capita basis, GDP fell by 0.1% in 2024 after a 0.9% decline in 2023. Whereas this is by no means a perfect gauge of living standards, it illustrates that momentum is still lacking.
UK interest rate cut forecasts pushed back, slightly.
City traders have slightly pushed back their expectations for when the Bank of England will cut interest rates.
The money markets are now indicating that the next cut to borrowing costs may not come until June – previously a cut, to 4.25%, was fully priced in by May.
The City still expects three rate cuts this year (ie two more during 2025, after last week’s cut). But the third is now only expected by November, rather than September (or even August) as previously expected.
May, August and November are more likely months for rate cuts, though, as the Bank is due to release new economic forecasts at those meetings.
Traders may be calcuating that the stronger-than-expected UK economic growth in Q4 takes some pressure off the Bank to cut interest rates – after all, it had expected GDP to fall by 0.1% in October-December, not grow by 0.1%.
They’ll also be digesting comments from Bank chief economist Huw Pill, who has told Reuters that the BoE needs to move cautiously with cutting interest rates because the long process of wrestling down inflation is not yet complete.
Stoxx 600 hits record high on Ukraine peace talk hopes
European stock markets are in a cheerier mood this morning, after Donald Trump announced he and Vladimir Putin have agreed to begin negotiations to broker a ceasefire in Ukraine.
The Stoxx 600 share index has gained 0.5% to a new alltime high, extending a run of highs.
Consumer goods makers are leading the rally – after Nestlé beat sales forecasts this morning – followed by miners and industrial companies.
European defense stocks are falling, though, as investors price in the chances of an end to the confict. Aerospace firms Leonardo (-2.4%), Dassault Aviation (-1.6%) and Thales (-0.6%) are all lower.
EU leaders haev warned, though, that they need to be part of negotiations on the fate of Ukraine, as Nato members gather in Brussels.
Holger Schmieding of Berenberg Bank says a serious initiative to stop the war would be “most welcome”, but adds that negotiations must meet two conditions to be successful:
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The US (and Europe) need to put enough pressure on Putin to force him to negotiate in earnest. That requires more rather than less support for Ukraine. Otherwise, Putin may just use the cover of talks to continue his aggression, hoping that the US and Europe would scale back support for Ukraine and thus let Putin move ahead on the battlefield.
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The outcome of negotiations needs to be genuinely acceptable to Ukraine. If Ukraine is forced into a deal that destabilises the country and amounts to a de facto win for Putin, the consequences for Ukraine and other parts of Europe could be quite negative instead.
Britain’s better-than-expected growth figures haven’t brought much cheer to the London stock market.
Shares are down in early trading, with the FTSE 100 index down 45 points or 0.5% at 8762 points, away from yesterday’s record high.
A clutch of big companies are dragging the index down, for various reasons.
British American Tobacco (-8%) are the top faller, after taking an $8bn charge over a court case in Canada and missing revenue expectations this morning.
Consumer goods giant Unilever (-5.8%) are weaker too, after announcing it will list its ice-cream business in London, New York and Amsterdam (a Neapolitan triple-listing?), and slightly missing estimates for underlying sales growth.
Reeves: Not satisfied with level of growth
Rachel Reeves is insisting that more needs to be done to fix the UK economy, following this morning’s better-than-expected growth figures.
Speaking to broadcasters this morning, after learning that GDP rose by 0.1% in the last quarter of 2024, the Chancellor said:
“The growth numbers have come in higher than many expected, but I’m still not satisfied with the level of growth that our economy is achieving.
“And that’s why I am determined to go further and faster in delivering the economic growth and the improvements in living standards that our country deserves.”
Reeves went on to argue that it isn’t possible to turn around “more than a decade of poor economic performance in just a few months”, saying:
“We are doing what is necessary to bring stability back to the economy, reforming the economy, the planning system, regulation and pensions to encourage investment in our economy, which is the lifeblood of a successful economy
“We need to go further and faster in doing that, to turn around our poor growth performance and to make working people better off.
And she insisted that her fiscal rules are “non-negotiable”, saying her pledge to stick to responsible borrowing levels created stability, allowing three interest rate cuts since last summer’s election.
UK GDP: What the economists say
Rection to this morning’s better-than-expected UK growth figures is pouring in.
Paul Dales, chief UK economist at Capital Economics, predicts that the UK economy will only “move sideways” over the next six months, telling clients:
After stagnating in Q3, the economy was saved from the same fate in Q4 (or worse) by a 0.4% m/m rise in GDP in December (consensus +0.1%, CE -0.1%). That’s pretty much the only growth there’s been for a while as it explains all of the 0.4% rise in GDP since Labour came to power in July and the 0.3% gain since last April.
It’s clear that a lot of the weakness is due to the rise in business taxes announced in October’s Budget as well as soft demand overseas
Anna Leach, chief economist at the Institute of Directors, says the UK ended 2024 with “a welcome growth surprise”, adding:
Professional, scientific and technical activities drove growth in December, and indeed was the strongest growth sector over 2024. Growth this year should be supported by further falls in interest rates. But headwinds to growth are building, from both the international environment and a rapidly softening labour market.
“It is welcome to see signs of life in the economy at the end of 2024. 2025 has already seen a welcome change in tone from the government, with the Chancellor firmly expressing the growth priority. The government has a strong policy pipeline to help improve the environment for investment in the UK, which is key to driving up productivity and growth. Action on industrial strategy, planning reform and infrastructure planning will be instrumental in supporting private sector confidence and investment further out.
Rob Morgan, chief investment analyst at Charles Stanley, says the growth in Q4 will provide “some rare relief for Chancellor Rachel Reeves”, but cautions:
It is not a time for victory laps certainly, and the danger of recession hasn’t gone away, but relative to expectations this is a win for the Chancellor. Concerns of a weak festive period did not transpire, and it offers something to build on this year.
Overall, it appears likely there will be a continued small improvement, at least in the short term. Consumers and businesses will continue to benefit from falling interest rates with three cuts made in the past six months or so. The boost to government spending should also provide a temporary uplift.
Debapratim De, director of economic research at Deloitte, sees “sluggish growth” in the short term:
“GDP growth has come in above expectations in the fourth quarter but by a small margin. Underlying momentum remains weak.
“Today’s data does not change our outlook for 2025. We continue to expect sluggish growth through spring, with the fiscal easing from last year’s Autumn Budget driving a pickup in activity over summer.”
Full story: UK economy grows by 0.1% in unexpected boost for Rachel Reeves
Richard Partington
Britain’s economy unexpectedly picked up in the final three months of 2024, official figures have shown, easing pressure on the chancellor, Rachel Reeves, after flatlining during the summer.
Figures from the Office for National Statistics show gross domestic product rose by 0.1% in the fourth quarter of 2024 – after zero growth in the previous three months – to beat the forecasts of City economists and the Bank of England for a decline of 0.1%.
The latest snapshot will provide a shot in the arm for Labour after Reeves faced intense criticism for denting business and consumer confidence with her £40bn tax-raising October budget.
Monthly figures show the economy grew by a better-than-expected 0.4% in December, fuelled by growth in the UK’s dominant services sector after a strong month for business-facing services. Economists had expected growth of 0.1% in December.
Liz McKeown, the ONS director of economic statistics, said:
“The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year.
“Across the quarter, growth in services and construction were partially offset by a fall in production. GDP per head, in contrast, fell back slightly in the quarter.
More here:
UK’s manufacturing recession continues as carmaking declines
Today’s GDP report shows that Britain’s production sector has shrunk for the last five quarters in a row, with activity declining by 0.8% in the fourth quarter of last year.
The fall in production was largely driven by a 0.7% decline in manufacturing and a 2.5% decline in mining and quarrying, the Office for National Statistics report.
The largest negative contributions came from the manufacture of transport equipment, which fell by 2.3%, and the manufacture of pharmaceuticals, which fell by 4.0%.
The ONS says:
The manufacture of transport has fallen for three consecutive quarters, mainly because of a decline in the manufacture of motor vehicles and motorcycles.
Data earlier this year showed that British car production fell in 2024 to its lowest level in seven decades – barring the coronavirus pandemic – as the industry struggles with weak demand and prepares to shift away from fossil fuels to electric vehicles.
