MONEY TALKS
UK economy grows again as GDP rises 0.1% – what it means for your money
It means the UK took another step away from recession
THE UK economy grew again in February, official figures show.
Gross Domestic Product (GDP) grew by 0.1% in February this year, following a rise of 0.3% in January, the Office for National Statistics said.
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The latest figures indicate the UK is exiting a technical recession.
The production side of the economy was strong, contributing the most to the UK’s overall growth.
Chancellor of the Exchequer Jeremy Hunt said: “These figures are a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan.
"Last week our cuts to National Insurance for 29 million working people came into effect across Britain, as part of our plan to reward work and grow the economy."
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It follows two quarters of GDP contracting between July and December last year.
The UK economy shrank by 0.3% in the last three months of 2023 meaning the UK tipped into a technical recession, defined as two or more quarters in a row of falling Gross Domestic Product (GDP).
But experts said the recession was considered "mild" compared to others in recent history.
The GDP figures for March will show if the UK has officially emerged from recession.
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Alice Haine, personal finance analyst at Bestinvest said the increase in GDP raises hopes that the downturn was "a short-term blip with a recovery already underway".
She added: "The Prime Minster, Rishi Sunak, will hope that restoring the economy to growth following a sluggish 2023, will boost the Conservatives poll ratings ahead of a General Election later this year."
What is inflation and what does it mean for me?
A healthy economy is one where GDP is growing but if it stalls or is falling, it's bad news for businesses and consumers.
Liz Mckeown, director of economic statistic and the ONS, said: "The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector.
"Services also grew a little with public transport and haulage, and telecommunications having strong months.
"Looking across the last three months as a whole, the economy grew for the first time since last summer."
The latest figures also mean interest rates may stay steady for now, with the Bank of England saying cuts “should still be a way off”.
The Bank rate has a big influence on the mortgage rates and interest costs paid by Brits.
Markets have now pushed back their bets, predicting the Bank will only start lowering rates from the current 5.25% in August or September.
It is a big change from the start of the year when economists reckoned falling inflation would mean the Bank would start cutting in May or June with the rate falling to 4% by Christmas..
Inflation stood at 3.4% in February and figures for March will be revealed on Wednesday.
Ed Monk, associate director at Fidelity International, said: "If today’s reading is positive for growth overall it may end up being bad news for both borrowers and financial markets, in the short-term at least.
"Both are waiting for the Bank of England to cut rates but wage rises and now better performance in parts of the economy are adding to inflationary pressures.
"It seems you can have a recovering economy, or you can have the relief of lower rates - but you can’t have both at the same time.”
What it means for your money
GDP is a measure of the economic output of companies, individuals and governments.
It's also a measure of how healthy and prosperous an economy is.
If GDP is going up, it generally means people pay more in tax because they're earning and spending more.
This means more money for the government who can spend the extra cash on public services such as schools and hospitals.
When the economy shrinks, this can go in reverse, meaning households can see their standard of living drop.
If GDP falls, it means businesses struggle and may lay off staff from work as well.
How to get free debt help
THERE are several groups which can help you with your problem debts for free.
- Citizens Advice - 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange - 0800138 1111
- National Debtline - 0808 808 4000
- Debt Advice Foundation - 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations - don't be tempted to use a claims management firm.
They say they can write-off lots of your debt in return for a large upfront fee.
But there are other options where you don't need to pay.
How to protect your finances
Despite GDP growing, you might still be feeling the pinch from the higher cost of living.
But there are ways you can keep your cash safe.
Make sure you go through all your bank statements and accounts so you know what your income and outgoings are every month.
You can save money by moving to a cheaper mobile phone tariff or by axing subscriptions you don't need like Netflix or Amazon Prime.
If you've got any outstanding debts, don't ignore them as it will only make your financial situation worse.
Stay on top of what you owe and always repay priority debts.
There are plenty of organisations where you can seek debt advice for free.
You should also check what benefits you are eligible for as you might be able to claim without realising.
Entitledto's free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.
If you don't want to register, consumer group moneysavingexpert.com and charity StepChange both have benefits tools powered by Entitledto's data that let you save your results without logging in.
There is also emergency funding available for struggling households, which is dished out by local councils.
The Household Support Fund is designed to help those on a low income or benefits cover the cost of food, energy and general living costs.
What help is available varies depending on where you live as each council sets it own eligibility criteria.
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It's worth getting in touch with your local authority to see what you might be able to get.
You can find what council area you fall under by using the government's council locator tool online.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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