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UK Economy Grew 0.7% in First Quarter of 2024

A general view of London's south bank of the River Thames including the city's tallest building the Shard, in London, Thursday, June 27, 2024. (AP Photo/Kin Cheung, Pool)
A general view of London's south bank of the River Thames including the city's tallest building the Shard, in London, Thursday, June 27, 2024. (AP Photo/Kin Cheung, Pool)
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UK Economy Grew 0.7% in First Quarter of 2024

A general view of London's south bank of the River Thames including the city's tallest building the Shard, in London, Thursday, June 27, 2024. (AP Photo/Kin Cheung, Pool)
A general view of London's south bank of the River Thames including the city's tallest building the Shard, in London, Thursday, June 27, 2024. (AP Photo/Kin Cheung, Pool)

Britain's economy grew 0.7% in the first three months of this year compared with the previous quarter, above an initial estimate of 0.6% growth, official figures showed on Friday.
The figures come less than a week before Britons vote in an election which opinion polls suggest will see Labour Party leader Keir Starmer replace Conservative Prime Minister Rishi Sunak.
Friday's data from the Office for National Statistics confirm Britain's economy exited a shallow recession at the start of 2024, Reuters reported.
But the overall growth picture is weak. First-quarter gross domestic product was just 0.3% higher than a year earlier, above an initial estimate of 0.2%.
Economists polled by Reuters had not expected any revisions to the quarterly or annual growth estimates.
Britain's economy has struggled since the last national election in December 2019, hurt by the COVID-19 pandemic - which dealt a lasting blow to the labor force - as well as Russia's invasion of Ukraine and post-Brexit trade frictions.

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British Assets Gain, Mid-cap Stocks Lead after Labour Election Win

A view of the Palace of Westminster which houses Britain's parliament, during the general election, in London, Britain, July 5, 2024. REUTERS/Hannah McKay Purchase Licensing Rights
A view of the Palace of Westminster which houses Britain's parliament, during the general election, in London, Britain, July 5, 2024. REUTERS/Hannah McKay Purchase Licensing Rights
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British Assets Gain, Mid-cap Stocks Lead after Labour Election Win

A view of the Palace of Westminster which houses Britain's parliament, during the general election, in London, Britain, July 5, 2024. REUTERS/Hannah McKay Purchase Licensing Rights
A view of the Palace of Westminster which houses Britain's parliament, during the general election, in London, Britain, July 5, 2024. REUTERS/Hannah McKay Purchase Licensing Rights

British domestic-focussed mid-cap stocks were the biggest gainers on Friday after the centre-left Labour Party surged to a comprehensive win in a parliamentary election with blue chip stocks, government bond prices and the pound higher.

Hopes that the incoming government will provide a period of economic stability after an often tumultuous 14 years of Conservative Party rule sent the FTSE 250 midcap index (.FTMC), up as much as 1.8% in early trading to its highest since April 2022.

The blue chip FTSE 100 index (.FTSE), was last up 0.2% and the yield on 10-year British government bonds or gilts, dropped 3 basis points to 4.17%, marginally better than other European markets, Reuters reported.

Labour won a massive majority in the 650-seat parliament while Rishi Sunak's Conservatives suffered the worst defeat in the party's long history as voters punished them for a cost of living crisis, failing public services, and a series of scandals.

"A landslide victory provides the sort of clarity and stability that equity markets need in an increasingly volatile world," said Ben Ritchie, head of developed market equities at abrdn.

"If the new government gets this right, businesses with significant exposure to the UK economy should be the likely winners - a shot in the arm in particular for companies in the FTSE 250 and FTSE Small Cap".

British home builders stood out, with an index tracking their shares up 2.3%.

"We think the formation of a Labour-majority government will have a positive impact on housebuilders and construction materials," said Aruna Karunathilake, portfolio manager at Fidelity.

"We expect Labour to reinstate housebuilding targets and perhaps also fund investment in local planning departments... That should alleviate builders’ concerns about planning bottlenecks impeding growth in the medium term."

Analysts at Goldman Sachs said that while Labour's manifesto policies imply relatively limited changes to fiscal policy they would modestly boost demand in the near term.

As a result, they raised their forecasts for British GDP growth by 0.1 percentage points in each of 2025 and 2026.