Consequently, the UK economy grew more slowly than expected in the third quarter of 2023. It captured just a fraction of the 0.1% increase in economic contribution. This represents a steep drop from the 0.3% growth we experienced last quarter. It marks a sharp retreat from the vigorous 0.7% quarterly growth logged in the first quarter of the year. Analysts were expecting a year-over-year growth rate of 0.2%, but the news is even worse than that.
And today, the Office for National Statistics (ONS) announced a 0.1% contraction in economic activity for September. This decline was entirely attributed to a sharp decrease in the production of cars. Yet a recent cyber attack on automotive giant Jaguar Land Rover (JLR) halted as much as 90 percent of production capacity. As a direct result, this steep decline took place. The automotive sector’s struggle weighed down the economy overall during the July-to-September period.
This week, Mel Stride, the Secretary of State for Transport made clear central government’s position. …as the PM and Chancellor were “in office but not in power.” He further claimed that Sir Keir Starmer had “stripped the chancellor of responsibility for the Budget,” suggesting political instability could be influencing economic performance.
Ruth Gregory, deputy chief UK economist at Capital Economics, noted that even without the negative impact of the JLR cyber attack, the economy “is struggling to gain decent momentum.” Sharpless’ argument is aimed at illuminating bigger picture, structural matters that might be restricting growth.
Suren Thiru, the Institute of Chartered Accountants in England and Wales’ economics director, had this to say. He reckons the new numbers will force the majority of rate-setters to pencil in at least one more round of policy loosening. This troubling sentiment highlights growing fears about the future direction of monetary policy and how it might react to persistent economic trouble.
While growth has generally cooled nationwide, some sectors have proven more resilient than others. Read more from Liz McKeown on how services were the main engine of the growth in the most recent quarter. Key industries leading the rapid recovery were business rental and leasing, live events, and retail. This was more than cancelled out, though, by declines in research and development and in hair and beauty salons.
Concerns are growing as car production continues to fall, particularly after JLR’s recent cyber attack. Economists and policymakers are even more alarmed by the slower growth rates that have accompanied this decline.
“There’s more to do to build an economy that works for working people.” – Rachel Reeves
As the government prepares for forthcoming budgetary decisions, Reeves emphasized her commitment to making “fair decisions to build a strong economy” aimed at addressing critical issues such as waiting lists, national debt, and cost of living challenges.