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The UK financial system didn’t develop within the third quarter, within the newest blow to a authorities already underneath fireplace from companies for its tax-raising Price range.
GDP didn’t register any progress within the three months to September, the Workplace for Nationwide Statistics stated on Monday, down from its first estimate of a 0.1 per cent growth.
The financial system was held again by the dominant companies sector, which stagnated over the quarter. Manufacturing output fell 0.4 per cent, offsetting a 0.7 per cent enhance within the development sector.
The figures present the economy stalled within the quick aftermath of Labour’s July election victory, even earlier than chancellor Rachel Reeves’ Price range dented enterprise confidence.
Reeves on Monday admitted that the federal government confronted a “large” problem however insisted that the Price range had laid the foundations for long-term progress.
If progress undershoots forecasts made within the Price range, it raises the prospect that the chancellor could have to ship spending cuts or increased taxes subsequent yr to make sure she continues to fulfill her borrowing guidelines.
“The problem we face to repair our financial system and correctly fund our public funds after 15 years of neglect is large,” Reeves stated. “However that is solely fuelling our fireplace to ship for working folks.”
The federal government has put boosting progress on the coronary heart of its agenda, however now faces the risk that the financial system might have contracted within the ultimate quarter of the yr.
GDP shrank 0.1 per cent in October, the second straight month-to-month contraction.
The ONS additionally revised its estimate for second-quarter progress down from 0.5 per cent to 0.4 per cent, indicating the financial system started slowing sooner than beforehand thought.
Current figures have pointed to a softening within the jobs market, cussed inflation and falling enterprise confidence.
The Financial institution of England final week predicted zero growth within the fourth quarter, down from its earlier forecast of 0.3 per cent progress.
Economists stated the main points of Monday’s downwardly revised information contained some vibrant spots, with client spending rising at a wholesome tempo, enterprise funding selecting up and households now not piling extra money into financial savings.
Paul Dales, on the consultancy Capital Economics, stated the downward revision within the third quarter was “primarily on account of exterior influences relatively than the home financial system”, together with an even bigger drag from web commerce.
However the total image was that progress had “floor to a halt”, he stated, on account of “the lingering drag from increased rates of interest, weaker abroad demand and a few issues over the insurance policies within the Price range”.
Elliott Jordan-Doak, senior UK economist on the consultancy Pantheon Macroeconomics, stated the revision wouldn’t change the BoE’s considering on rates of interest, as a lot of the weak point had been in authorities spending and would “fade away” subsequent yr.
Final week Andrew Griffith, shadow enterprise secretary, claimed the UK was heading for a “January of discontent” and the opportunity of a recession. He stated if there was a recession it might be “made in Downing Avenue”.
