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The UK economic system barely grew within the third quarter and contracted in September, in a blow to the Labour authorities’s plans to ship greater progress.
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GDP rose simply 0.1 per cent because the nation’s dominant companies sector struggled throughout the three months to September, lower than consensus expectations of 0.2 per cent and properly under the second quarter’s 0.5 per cent.
Output fell in September itself, dragged down by a slide in manufacturing exercise, in response to knowledge launched on Friday from the Office for National Statistics.
Chancellor Rachel Reeves signalled her disappointment with the figures, which observe financial output throughout Labour’s first three months in workplace and sign how far the UK is from reaching the federal government’s purpose of “the very best sustained progress within the G7”.
“Am I happy with the numbers revealed at this time? After all not,” Reeves informed broadcasters. “I need progress to be stronger, to come back sooner, and likewise to be felt by households proper throughout the nation.”
The ONS figures confirmed that the companies sector, which accounts for about 80 per cent of the UK economic system, expanded simply 0.1 per cent within the quarter, down from 0.6 per cent within the earlier three months.
In addition they famous that throughout the interval, the UK underperformed G7 nations together with the US, France and Germany, which expanded respectively by 0.7 per cent, 0.4 per cent and 0.2 per cent.
Prime Minister Sir Keir Starmer stated earlier than Labour’s July 4 election victory that he needed progress of two.5 per cent a 12 months.
The economic system has misplaced momentum for the reason that first quarter, when it grew 0.7 per cent and rebounded from a technical recession on the finish of 2023. Economists stated the slowdown confirmed the persistent challenges of low productiveness and excessive rates of interest.
Reeves argued the earlier Conservative authorities was answerable for the economic system’s failings, including that progress was Labour’s “primary mission” because it sought to “flip across the poor efficiency of the final decade”.
However the CBI business group and the Tory opposition stated the federal government’s messaging had depressed exercise forward of the chancellor’s tax-raising Finances final month.
Ben Jones, lead economist on the CBI, stated uncertainty forward of the Finances “in all probability performed a giant half” within the third-quarter stagnation, with corporations delaying funding selections beforehand.
He added that Reeves’ subsequent transfer to extend employers’ nationwide insurance coverage would additionally “set off a extra cautious method to pay, hiring and funding”.
Mel Stride, shadow chancellor, stated the federal government had “talked down the UK economic system” on coming to workplace, hitting confidence.
Earlier surveys confirmed that client confidence fell within the run-up to October’s Finances as shoppers anticipated tax will increase.
Nonetheless, the ONS knowledge confirmed resilience amongst shoppers as easing value pressures helped family spending rise 0.5 within the third quarter, up from 0.2 per cent within the second.
Suren Thiru, economics director on the Institute of Chartered Accountants in England and Wales, stated the third-quarter knowledge painted “a extra lifelike image of the UK’s underlying progress trajectory” than earlier figures touted by former prime minister Rishi Sunak of OECD average-beating progress.
GDP per capita, a greater measure of dwelling requirements that takes under consideration inhabitants adjustments, contracted by 0.1 per cent in contrast with the earlier quarter and stays 0.7 per cent under its pre-pandemic stage.
UK productiveness, measured as output per hour labored, fell 1.8 per cent within the third quarter from the identical interval a 12 months earlier and was barely above the degrees recorded earlier than the monetary disaster, separate figures from the ONS on Friday confirmed.
The Financial institution of England expects progress to stay lacklustre within the last quarter of the 12 months and has forecast a 0.3 per cent enlargement. The BoE cut interest to 4.75 per cent this month however indicated {that a} additional discount in borrowing prices was unlikely earlier than early subsequent 12 months, because it weighs the outlook for inflation.
In her set piece Mansion Home speech this week Reeves referred to as for monetary regulators to assist the economic system by specializing in progress in addition to danger. She additionally referred to as on the UK to “reset” its relationship with the EU to beat structural financial challenges from Brexit.
Sterling fell 0.1 per cent to $1.2658 after the publication of the figures. The yield on the two-year gilt fell 0.01 share factors to 4.41 per cent.
