'Finally a good news story for the UK' as GDP grows at fastest pace in more than two years

The City was basking in a rare glow of “genuinely strong” economic news today as Britain powered out of recession at a far quicker pace than expected.

The gloom of last year’s slump and cost of living crisis was forgotten as news of the 0.6% advance in GDP in the first quarter helped send the FTSE 100  to yet another all-time high. It was the fastest growth since the fourth quarter of 2021 when Britain was emerging from the pandemic.

The City had only been expecting 0.4% quarterly growth but crucially the strong data does not seem to have dampened hopes of an interest rate cut as early as June, or August at the latest.

Figures from the Office for National Statistics (ONS) showed the recovery from last year’s “technical” recession was led by the services sector, which grew by 0.7%. It follows GDP declines of 0.3% in the fourth quarter and 0.1% in the third quarter, which together met the definition of recession.

In a note entitled “Finally a good news story for the UK”, the economics team at Japanese bank Nomura said: “This seems to be a genuinely strong number. With some GDP releases it is possible to point to a few volatile factors driving the strength or weakness; however, with this release it looks like the fundamentally most important factors were all positive.”

Danni Hewson, head of financial analysis at broker AJ Bell, said: “The UK has charged out of what will go down in the history books as the shortest, shallowest recession on record. After months of floundering around a flatline, growth of 0.6% will give the UK economy a real confidence boost.

“Services and manufacturing have helped offset ongoing challenges being faced by the construction sector. Not only has it been dampened by real life downpours, but the Bank of England’s continued rate pause has softened demand from would-be homeowners whilst changing working habits have pushed businesses to rethink their office requirements.”

Aster Crawshaw, senior partner of international law firm, Addleshaw Goddard. “The latest GDP figures show the underlying strength of the UK economy, and will give confidence to those looking to deploy capital and invest into major projects in London and across the country in sectors ranging from energy, utilities, construction, digital assets, healthcare and retail.”

The better than expected GDP growth sent the FTSE 100 index of leading shares surging to a new record. By mid morning the blue chip index stood at 8442, up around 60 points.

The positive feel was enhanced by an update from property portal Rightmove, which said that sales agreed between January and April were up by almost a fifth, “with both sellers and buyers now increasingly looking to transact”. CEO Johan Svanstrom said: “We continue to expect a better year for the UK property market in 2024 than in 2023.”