UK’s Economic Growth Outpaces G-7 in 2024 as Labour Reforms Take Effect
The UK outperformed its G-7 (Group of Seven) peers as the country’s economic growth in the first half of 2024 was the best among major advanced economies. According to the latest official data, UK GDP rose by 0.6% in the second quarter after a 0.7% increase in the first. This strong growth, with cooling inflation and an uptick in hiring, has put the UK economy firmly in a “Goldilocks” phase—not too hot to spark inflation, yet strong enough to solidify recovery post-recession.
UK became the fastest-growing economy in the G-7 during the first half of 2024, outstripping the US and European nations. Another strong performance was UK GDP growth of 0.6% in the second quarter, which took the economy further away from last year’s recession. According to Yael Selfin, chief economist at KPMG UK, the “gangbusters” growth of the country underlines how resilient it is.
According to the latest data, there has been a bounce in jobs, and the jobless rate fell after workers were hired at the fastest pace since November 2023. A bout of jobs has therefore balanced out with cooling wage growth, which further soothes concerns about wage-driven inflation. The general consumer price inflation edged up slightly to 2.2% in July, below expectations, while services inflation—a key indicator for the BOE—fell to its lowest level in more than two years.
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The economy is finely balanced, with the BOE now expected to lower interest rates cautiously given solid growth but subdued inflationary pressures. Yet, concerns that constraints in workforce size and productivity may weigh on the recovery come at a time when business groups are warning about the underlying fragility of the economy.
Economists have coined the current scenario as a “Goldilocks” moment for the UK—one in which growth is strong but not enough to trigger significant inflation. Forecasters predict steady expansion of 0.3% per quarter through the end of 2025, with growth of probably 1.5% by 2026. Another forecast by the Office for Budget Responsibility is for even better growth of around 2% in the next few years, matching well with Prime Minister Keir Starmer’s goal for sustained economic expansion.
Labour’s Reforms and the Road Ahead
Labour’s ‘July 4’ election under Keir Starmer has sparked into a barrage of economic reform packages meant to translate this new momentum. Early moves on planning rule changes and jobs uprating could help to increase trend growth in the UK. Economists said the recent spurt should prove short-lived, but suggested Labour’s ambition in investment and supply-side reform made a fresh rise in medium-term growth a possibility.
But even when the economy appears to be sweetly balanced, the Bank of England doesn’t seem so sure. Bloomberg Economics reckoned the UK has been growing at its trend rate of about 0.3% in a quarter, half of the second quarter. Therefore, the bank is assumed to lower interest rates cautiously for fear of provoking inflation by letting the economy run, adding to the inflation pressure.
