Despite this positive momentum, uncertainties loomed as December witnessed NHS strikes, leaving Q4 GDP prospects uncertain.

The EY ITEM Club anticipates a gradual escape from a prolonged period of stagnation in 2024. Factors contributing to this optimism include falling inflation, resulting in real wage growth, anticipated reductions in spring energy bills, and the prospect of lower interest rates and tax cuts mitigating the impact of fiscal and monetary policies.

Martin Beck, chief economic advisor to the EY ITEM Club, said: “After GDP fell 0.3% month-on-month in October, it returned to growth in November, expanding 0.3% – more than the consensus had expected.

“The rise was driven mainly by services output, which increased 0.4%. Industrial production was up 0.3%, although construction output fell 0.2%. On a three-month-on-three-month basis, GDP in November was 0.2% lower.”

The December Purchasing Managers’ Index (PMI) suggested continued growth, but NHS strikes may have adversely affected the public sector’s output, possibly leading to a GDP contraction in Q4, raising the spectre of a technical recession at the close of 2023.

Despite the economic challenges over the past two years, the outlook has brightened. Fast-falling inflation has spurred real wage growth, and expectations of monetary policy easing have led to reduced market interest rates. The EY ITEM Club foresees a 125bps cut in the Bank Rate by the Bank of England, beginning in May. Lower wholesale gas prices signal potential household energy bill reductions in spring, coupled with January’s National Insurance Contributions cut.

Mr Beck added: “Prospective support to the public finances from lower interest rates have increased the odds of further tax reductions in the Chancellor’s Spring Budget.

“As a result, the EY ITEM Club intends to upgrade its expectations for UK GDP growth this year and next in its forthcoming Winter Forecast, with the economy looking likely to end this year on a more upbeat note than 2023, although ongoing geopolitical tensions present a risk to that outlook.”