UK economy returns to growth in January

The UK economy returned to growth in January, according to data released on Friday by the Office of National Statistics, raising hopes that a recession will be avoided.

GDP grew 0.3% on the month following a 0.5% contraction in December, coming in ahead of consensus expectations for 0.1% growth.

Growth was driven by the services sector, which expanded 0.5% after a 0.8% contraction in December. The biggest contributors were education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which rebounded after falls in December.

ONS director of economic statistics, Darren Morgan, said: "The economy partially bounced back from the large fall seen in December. Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, showed zero growth.

"The main drivers of January's growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month."

Morgan said postal services also partially recovered from December's strikes, although this was somewhat offset by a notable drop in construction.

Chancellor Jeremy Hunt said: "In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go.

"Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy - so we can improve living standards for everyone."

Hunt is due to deliver his budget statement next Wednesday.

Ruth Gregory, deputy chief UK economist at Capital Economics, said that looking beneath the surface, the figures suggest the economy is on weaker ground than it appears.

"The rise was largely a reflection of the fewer number of strikes than in December," she said. "This meant that a lot of the falls in output in December were reversed."