To put that in context, the UK economy grew by just 0.1% in the three months to September. This faster-than-expected growth has worried analysts and government officials alike. This modest increase follows a decline of 0.1% in GDP last month, indicating a contraction that could have broader implications for economic stability. It’s these new figures released by the ONS that are the most shocking. They represent a dramatic deceleration versus the last few quarters.
It declined from 0.7% in Q1 down to a paltry 0.3% in Q2. Britain’s OBR have projected economists and the Bank of England’s monetary policy committee have anticipated a growth settling in the third quarter of around 0.2%. Yet, the real numbers fell short of these projections.
The monthly GDP releases from the ONS are important in understanding our current economic climate. That’s all the more important at the moment with the UK government doubling down on economic growth at all costs. Chancellor Rachel Reeves is preparing to unveil her Autumn Budget in just two weeks, a crucial moment as the government seeks to address these economic challenges.
The most recent data has brought even worse news. Should GDP continue to fall for a second quarter in a row, the UK would find itself in a technical recession, forcing freezes on pay and an increase in unemployment.
Reeves acknowledged the disappointing performance of the economy, stating, “Growth has not been as strong as I would like.” She further added that “the economic circumstances have declined, deteriorated since a year ago.” This frank appraisal comes against the backdrop of a Labour government’s incredible task of restoring the country’s economy back on track.
Further raising the red flags, during the summer months economic activity was flat (#5), and negative when accounting for growth in our working age population. The most important driver of that deceleration was the decrease in automotive manufacturing. This sub-sector has historically been one of the most resilient within UK manufacturing.
Liz McKeown from an economic analysis firm commented on the situation: “Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period.” This insight is indicative of larger worries about the performance of different sectors across the economy.
Even with these disappointments, many experts are still guardedly hopeful. A report from Pantheon Macroeconomics suggested, “we see a good chance that quarterly growth will round up to 0.3%,” indicating that while current figures are disappointing, there may be room for improvement in the coming months.