With tax rises coming into force in April, concerns remain that economic growth will remain sluggish for sometime.

Businesses have warned that paying more in National Insurance, along with minimum wages rising and business rates relief being reduced, could affect the economy’s ability to grow, with employers expecting to have less cash to give pay rises and create new jobs.

The Bank of England has also halved its growth forecast the UK for this year, amid concerns that higher costs for employers could hit hiring, profits, investment – and push up prices.

Paul Dales, chief UK economist at Capital Economics, said the economy was “all-but stagnating” as businesses adjusted for higher costs and “more uncertainty overseas” – pointing to the introduction of trade tariffs in the US by President Donald Trump.

He said it was a clear that “a lot of the weakness” was due to the rise in taxes on firms announced by Chancellor Rachel Reeves in her Budget last year, with “business sentiment on the floor” and investment and consumer spending down.

“Overall, the economy is unlikely to do more than move sideways over the next six months,” he suggested.

But the latest figures showing a return to growth at the end of 2024 will be welcome news for the government, which has made growing the economy its top priority in its effort to improve living standards.

In December alone, the UK economy was estimated to have grown by 0.4%, compared to small uptick in November and a contraction October.

Film distribution firms, pubs and bars all had a “strong month”, as did industries involved in machinery manufacturing, according to Liz McKeown, director of economic statistics at the Office for National Statistics

However, this was offset by weak months in trade for computer programming, publishing and car sales businesses.

In the construction sector, the final months of 2024 saw an increase in new work driven by new private housing projects, but repairs and maintenance work from private homes fell over the period, suggesting homeowners cut back.