The UK economy has surprised economists this year by posting higher growth than expected.
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economy → surprise → growth
Mauricio Alencar looks at whether signs of “good growth” are beginning to appear – and why it’s not feeding through into living standards.
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it → look → standards
Before coming to power, the Labour Party promised to make the UK the fastest growing economy in the G7.
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UK → come → G7
Figures on Thursday morning suggested this pledge has been achieved, and ministers have rushed to take credit.
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ministers → suggest → credit
A year into government, modelled on China’s approach to business, the government published its industrial strategy.
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government → model → strategy
New statistics suggest that growth is broadly aligned with Labour’s apparent method of “picking winners” – to the detriment of some industries.
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growth → suggest → industries
Labour officials had a Star Wars-sounding handle for its designated high-potential sectors: IS-8.
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officials → have → sectors
It includes advanced manufacturing, clean energy, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.
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It → include → manufacturing
Critics of the plan argued growth in the economy would not be organic.
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growth → argue → economy
That, though, appears to be part of the point.
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That → appear → point
Andy Burnham has doubled down his predecessor’s industrial strategy, highlighting the need for “good growth”, as opposed to any growth for the sake of growth.
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Burnham → double → growth
It raises the question of whether Whitehall officials tasked with boosting the government’s industrial strategy are also thinking on the kind of growth that ministers don’t want.
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ministers → raise → that
In the last two years, official figures have broadly beaten market expectations.
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figures → beat → expectations
The UK economy accelerated in the third quarter of this year, hitting 0.7 per cent growth, despite predictions that the country was heading for a slowdown.
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country → accelerate → slowdown
Rachel Reeves, the former Chancellor, also offered her take on Thursday, praising “just how great a turnaround we achieved” in the economy.
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we → offer → economy
But beneath the latest set of data, a more interesting story on the economy has emerged.
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story → emerge → economy
‘It’s more than just AI’
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It → ’ → AI
Last week, the Bank of England said about a fifth of UK growth has been generated by AI-related investment.
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fifth → say → investment
Bloomberg Economics thinks that about a fifth of growth has been driven by the ‘general purpose’ technology.
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fifth → think → technology
But as Deutsche Bank’s Sanjay Raja pointed out, “it’s more than just AI”.
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it → point → AI
Official data showed that while growth of about 4.4 per cent in computer programming has helped boost the digital and technologies sector, the UK economy is benefitting from relatively strong performances across other parts of IS-8.
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economy → show → IS-8
Legal and accounting, for instance, grew by 2.3 per cent in the last quarter.
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Legal → grow → quarter
Since the 2024 election, the industry has added over £2bn in value to the economy.
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industry → add → economy
Some economists have suggested that added tax speculation before recent budgets have had upsides on growth in services after all, even it rumours cost the economy in other ways by prompting business owners to sell assets or pensioners to withdraw cash prematurely.
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rumours → suggest → cash
It’s not just professional and business services reaping the benefits of a government ready to back specific sectors.
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services → ’ → sectors
The creative, arts and entertainment industry is up 15.2 per cent since the election, pharmaceuticals is up by a similar proportion, and electricity-related components have also lifted the wider production sector average.
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components → relate → average
Meanwhile, the financial services sector is among the biggest contributors to growth in absolute terms, adding more than £1bn to the economy since 2024.
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sector → add → 2024
Perhaps most emphatically of all, aircraft and spacecraft repair – one of the finer sub-industries monitored by the ONS – has grown by 29.9 per cent, while aerospace manufacturing and ship and boat building have also enjoyed a boost since Labour took power.
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Labour → monitor → power
This would surely please Chancellor John Healey, who has staked his economic agenda on making the defence sector contribute more substantially on economic growth.
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sector → please → growth
What ‘good growth’ means for some
Equally significant, however, are the sectors which have suffered under Labour.
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which → mean → Labour
Gambling and betting is one of the worst performing services sectors in the UK economy, after being hit with new taxes in Rachel Reeves’ 2025 Budget.
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Gambling → perform → Budget
Labour’s net zero sprint is also hitting oil and gas extraction, which has been one of the biggest losers of the government in the last two years.
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which → hit → years
Refined petroleum and petrochemicals industries have declined.
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industries → decline → ?
Criticism around the farming tax has also seemed to hit the agriculture sector, which has fallen slightly year-on-year.
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which → seem → year
But areas of the economy, which are crucial politically speaking, appear to have been overlooked.
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which → speak → economy
Most devastatingly for the governing party, construction has faltered, with the value added to the economy shrinking since 2024 despite a manifesto pledge to build 1.5m homes.
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value → govern → homes
Related industries such as cement and concrete manufacturing or real estate activities have struggled too.
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industries → struggle → cement
A struggling construction industry could also put Labour’s public infrastructure drive at risk.
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industry → struggle → risk
Then there are industries that Burnham has taken a more active interest in fixing.
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Burnham → be → interest
Sewerage services plus food and beverage services, which covers hospitality and retail, have been among the biggest drags on growth, according to official statistics.
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which → cover → statistics
…and 11 more, not listed.
The Aporia
