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The Bank of England is seeing signs of a “recovery” in the economy, its governor said on Monday, downplaying upcoming data some analysts say will show the UK was in a technical recession at the end of last year.
Andrew Bailey said the BoE’s latest forecasts hinted at “somewhat stronger growth” ahead, while warning that productivity and investment trends meant supply remained “very constrained” on the economy.
If there had been two successive quarters of contraction in gross domestic product at the end of last year, the fall would be “very slight”, Bailey told an audience at Loughborough University. “What I would put more emphasis on, actually, is that the indicators that we have seen since then have shown signs of recovery.”
The Office for National Statistics releases its first estimate of economic performance for the final quarter of 2024 on Thursday. The economic report will be closely watched at Westminster as Prime Minister Rishi Sunak attempts to narrow the gap with Labor in the polls. ‘opinion.
Last week, the National Institute for Economic and Social Research said the UK could have slipped into a technical recession by the end of 2023, with two consecutive quarters of contracting growth.
As well as the GDP report, Sunak faces the prospect of two potential defeats in Thursday’s by-election.
Conservative leaders privately admit the party is set to lose its two seats in Wellingborough in Northamptonshire and Kingswood near Bristol, with a new national opinion poll putting Sunak’s party 25 points behind Labor. The Redfield and Wilton Strategies survey puts the Conservatives at 21 per cent nationally – their lowest figure since Sunak became prime minister.
The Conservatives are defending a majority of 18,540 votes in Wellingborough and a margin of 11,220 votes in Kingswood, but Labor is confident of winning both seats on Thursday.
“We don’t have much hope for either,” admitted one conservative strategist. The election campaign of senior conservatives has been low-key.
“The Conservatives will hide behind the word ‘technical’, but it would be a big moment if the data showed we were in recession,” said a senior Labor figure.
“Sunak’s main argument is that he knows how to manage the economy, but if the ‘R’ word is discussed in an election year it’s very bad for him. We want to lead elections on the economy.”
Downing Street declined to comment ahead of the release of the ONS data, but Sunak said on Monday: “At the start of this year I really believe the economy has turned a corner and we are heading in the right direction.”
Bailey’s comments came after a speech focused on financial regulation, and he offered no new guidance on the outlook for interest rates. The Bank’s Monetary Policy Committee this month kept interest rates at 5.25 percent, but opened the door to cuts in borrowing costs this year, saying it needed to first see “more evidence” of inflation moving in the right direction.
The BoE raised its growth projections slightly when announcing its latest rate decision, forecasting that the economy would grow by around a quarter of a percent this year, compared to a previous estimate of zero. It forecasts growth of 0.75 percent for 2025.