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| How fast is the UK's economy growing and what is GDP? | How fast is the UK's economy growing and what is GDP? |
| (25 days later) | |
| The UK's economy grew by more than expected at a rate of 0.5% in February, according to the latest official figures. | |
| The strength of the economy affects things like pay increases for workers and the amount of tax the government can raise to pay for services. | The strength of the economy affects things like pay increases for workers and the amount of tax the government can raise to pay for services. |
| What is GDP and how is it worked out? | What is GDP and how is it worked out? |
| GDP stands for gross domestic product, and is a measure of all the economic activity of companies, governments and people in a country. | GDP stands for gross domestic product, and is a measure of all the economic activity of companies, governments and people in a country. |
| In the UK, the Office of National Statistics (ONS) publishes new GDP figures every month, external. However, quarterly figures - covering three months at a time - are considered more important. | In the UK, the Office of National Statistics (ONS) publishes new GDP figures every month, external. However, quarterly figures - covering three months at a time - are considered more important. |
| Most economists, politicians and businesses like to see GDP rising steadily. | Most economists, politicians and businesses like to see GDP rising steadily. |
| That's because it usually means people are spending more, extra jobs are created, more tax is paid and workers get better pay rises. | That's because it usually means people are spending more, extra jobs are created, more tax is paid and workers get better pay rises. |
| When GDP is falling, it means the economy is shrinking - which can be bad news for businesses and workers. | When GDP is falling, it means the economy is shrinking - which can be bad news for businesses and workers. |
| If GDP falls for two quarters in a row, that is known as a recession, which can lead to pay freezes and job losses. | If GDP falls for two quarters in a row, that is known as a recession, which can lead to pay freezes and job losses. |
| How much money does the UK government raise and spend each year? | How much money does the UK government raise and spend each year? |
| Where does the government borrow billions from? | Where does the government borrow billions from? |
| What is happening to the UK economy? | What is happening to the UK economy? |
| The UK grew strongly in the first half of 2024, when the economy was rebounding from the brief recession at the end of 2023. | The UK grew strongly in the first half of 2024, when the economy was rebounding from the brief recession at the end of 2023. |
| GDP increased by 0.7% between January and March, and 0.5% between April and June. | GDP increased by 0.7% between January and March, and 0.5% between April and June. |
| However, growth has slowed since then. | However, growth has slowed since then. |
| The economy had zero growth between July and September last year, before picking up slightly in the final three months of 2024. | The economy had zero growth between July and September last year, before picking up slightly in the final three months of 2024. |
| February's uptick was driven by a boost in manufacturing and production. | |
| The government has made economic growth a key political priority. | The government has made economic growth a key political priority. |
| However, the Bank of England has halved its growth forecast for the year ahead. In February it said it expects the economy to grow by 0.75% during 2025, down from its previous estimate of 1.5%. | However, the Bank of England has halved its growth forecast for the year ahead. In February it said it expects the economy to grow by 0.75% during 2025, down from its previous estimate of 1.5%. |
| It is concerned about the impact of higher inflation in the UK as a result of higher wage and national insurance costs for employers, and increased energy and water bills for consumers. US trade tariffs could also put prices up. | It is concerned about the impact of higher inflation in the UK as a result of higher wage and national insurance costs for employers, and increased energy and water bills for consumers. US trade tariffs could also put prices up. |
| On 26 March, the Office for Budget Responsibility (OBR) - which monitors the government's spending plans and performance - also halved its growth forecast for this year to 1%. | |
| Economic forecasts are not always accurate but predictions from the Bank of England and the OBR are looked at closely. | Economic forecasts are not always accurate but predictions from the Bank of England and the OBR are looked at closely. |
| UK economy grew more than expected in February | |
| Low growth and rising prices - it's looking gloomy for the UK | Low growth and rising prices - it's looking gloomy for the UK |
| How does GDP affect me? | How does GDP affect me? |
| If GDP is going up steadily, people pay more in tax because they're earning and spending more. | If GDP is going up steadily, people pay more in tax because they're earning and spending more. |
| This means more money for the government, which it can choose to spend on public services, such as schools, police and hospitals. | This means more money for the government, which it can choose to spend on public services, such as schools, police and hospitals. |
| When the economy shrinks and a country goes into recession, these things can go into reverse. | When the economy shrinks and a country goes into recession, these things can go into reverse. |
| Governments tend to get less money in tax, which means they may decide to freeze or cut public spending, or put taxes up. | Governments tend to get less money in tax, which means they may decide to freeze or cut public spending, or put taxes up. |
| In 2020, the Covid pandemic caused the most severe UK recession for more than 300 years, which forced the government to borrow hundreds of billions of pounds to support the economy. | In 2020, the Covid pandemic caused the most severe UK recession for more than 300 years, which forced the government to borrow hundreds of billions of pounds to support the economy. |
| Why are prices rising in the UK? | Why are prices rising in the UK? |
| When will interest rates fall? | When will interest rates fall? |
| How is GDP measured? | How is GDP measured? |
| GDP can be measured in three ways: | GDP can be measured in three ways: |
| Output: The total value of the goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government | Output: The total value of the goods and services produced by all sectors of the economy - agriculture, manufacturing, energy, construction, the service sector and government |
| Expenditure: The value of goods and services bought by households and by government, investment in machinery and buildings - this also includes the value of exports, minus imports | Expenditure: The value of goods and services bought by households and by government, investment in machinery and buildings - this also includes the value of exports, minus imports |
| Income: The value of the income generated, mostly in terms of profits and wages | Income: The value of the income generated, mostly in terms of profits and wages |
| In the UK, the ONS publishes one single measure of GDP, which is calculated using all three measurements. | In the UK, the ONS publishes one single measure of GDP, which is calculated using all three measurements. |
| But early estimates mainly use the output measure, using data collected from thousands of companies. | But early estimates mainly use the output measure, using data collected from thousands of companies. |
| Why does the GDP figure sometimes change? | Why does the GDP figure sometimes change? |
| The UK produces one of the quickest estimates of GDP of the major economies, about 40 days after the quarter in question. | The UK produces one of the quickest estimates of GDP of the major economies, about 40 days after the quarter in question. |
| At that stage, only about 60% of the data is available, so the figure is revised as more information comes in. | At that stage, only about 60% of the data is available, so the figure is revised as more information comes in. |
| The ONS publishes more information about this on its website, external. | The ONS publishes more information about this on its website, external. |
| What are the limitations of the GDP figure? | What are the limitations of the GDP figure? |
| GDP doesn't tell the whole story: | GDP doesn't tell the whole story: |
| the hidden economy: unpaid work such as caring for children or elderly relatives isn't captured | the hidden economy: unpaid work such as caring for children or elderly relatives isn't captured |
| inequality: rising GDP could result from the richest getting richer, rather than everyone becoming better off, and some people could be worse off | inequality: rising GDP could result from the richest getting richer, rather than everyone becoming better off, and some people could be worse off |
| living standards: if the population is also growing, increased GDP can still mean less money per person, which can reduce people's living standards. This is why the GDP per capita measure is important | living standards: if the population is also growing, increased GDP can still mean less money per person, which can reduce people's living standards. This is why the GDP per capita measure is important |
| Official GDP figures don't take into account unpaid work like looking after children | Official GDP figures don't take into account unpaid work like looking after children |
| Some critics also argue that GDP doesn't take into account whether the economic growth it measures is sustainable, or the environmental damage it might do. | Some critics also argue that GDP doesn't take into account whether the economic growth it measures is sustainable, or the environmental damage it might do. |
| Alternative measures have been developed which try to capture this. | Alternative measures have been developed which try to capture this. |
| Since 2010, the ONS has also measured well-being, external alongside economic growth. This assesses health, relationships, education and skills, as well as people's personal finances and the environment. | Since 2010, the ONS has also measured well-being, external alongside economic growth. This assesses health, relationships, education and skills, as well as people's personal finances and the environment. |
| But despite its limitations, GDP is still the most widely-used measure for most government decisions and international comparisons. | But despite its limitations, GDP is still the most widely-used measure for most government decisions and international comparisons. |