MONEY TALKS
UK economy grows in January as GDP increases by 0.2% – what it means for your money
We explain what the latest news means for you
THE UK economy has returned to growth, the latest figures show.
Gross Domestic Product (GDP) rose by 0.2% in January this year, following a fall of 0.1% in December.
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The rise was partly due to growth in the services and construction sectors, the Office for National Statistics (ONS) said.
The economy picked up due to strong growth in the retail and wholesaling sectors as well.
Responding to the latest figures, Chancellor Jeremy Hunt said: “While the last few years have been tough, today’s numbers show we are making progress in growing the economy - part of which makes it possible to bring down National Insurance contributions by £900 this coming year.
“But if we want the rate of growth to pick up more we need to make work pay which means ending the unfairness of taxing work twice."
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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).
It came after figures in February revealed the economy contracted by 0.1% in December.
But experts said the recession was considered "mild" compared to others in recent history.
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Christopher Breen, an economist for the Centre for Economics and Business, said the downward turn may not last longer than two quarters.
Following today's figures, Alice Haine, personal finance analyst at Bestinvest, said the UK was taking its "first tentative steps out of recession".
This would raise hopes the "country's downturn will be short-lived and shallow", she said, in a boost for households and the government.
She added: "The hope from here is that January’s slightly more promising GDP figure, largely driven by a strong performance in the services sector with upbeat retail sales volumes helping to offset the steep drop in December, will energise the economy and set it on the road to recovery pushing any recession talk firmly into the rear-view mirror."
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The latest figures also mean interest rates may stay steady for now, with the Bank of England (BoE) wary of keeping inflation lower.
Inflation peaked at 11.1% in October 2022, but has slowed in recent months following successive base rate rises.
In January, it stood at 4%, but still above the BoE's 2% target.
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 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.
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.
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].
Plus, you can join our Facebook group to share your tips and stories.
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