UK Economy in Trouble? Flat Growth & Falling Living Standards Explained!

The UK economy is struggling—real GDP growth is sluggish, business confidence is falling, and real living standards are under pressure. With growth at just 0.1% in the last quarter and GDP per capita declining, are we heading for another recession? In this Tutor2u Economics update, Geoff Riley, Co-Founder of Tutor2u, breaks down the latest ONS data, exploring what this means for households, businesses, and policymakers. Stay tuned as we unpack the key trends, the impact of population growth, and the role of "animal spirits" in economic confidence.

1️⃣ Flat GDP Growth & Risk of Recession

The UK economy grew by just 0.1% between October and December 2024 (ONS data).

Overall real GDP grew by 0.9% in 2024, but real GDP per head declined by 0.1%.

GDP per capita has fallen for six of the last eight quarters, signaling stagnation in living standards.

Business confidence is falling, with signs of a downturn in economic activity.

2️⃣ Falling Real Living Standards

The economy is effectively in recession in terms of real output per person, even if overall GDP is growing slightly.

The cost-of-living crisis remains a key issue, as real incomes struggle to keep pace with inflation and economic uncertainty.

3️⃣ Population Growth & Its Impact

The UK population grew by an estimated 1% per year in 2022 and 2023, driven by higher immigration from non-EU nationals.

This is the fastest UK population growth in over 75 years, impacting GDP per capita figures.

4️⃣ Business Confidence & "Animal Spirits" Declining

Firms are showing less optimism, leading to reduced investment and hiring.

The fall in "animal spirits" (Keynesian concept of confidence and sentiment in markets) suggests slower future growth.

5️⃣ Economic Outlook – Uncertainty Ahead

With declining growth rates, the UK remains vulnerable to an economic slowdown.

The risk of a full-blown recession is rising, depending on business activity and consumer spending trends.