GDP figures today confirm that the UK economy grew very modestly by 0.1% from July to September. This growth was below analysts’ expectations, which were looking for a 0.2% increase. Things on this list explain why that slowdown is happening. The biggest culprit is the continuing collapse in motor vehicle output, including a particularly large decline in September following a cyber attack on Jaguar Land Rover (JLR).
Ruth Gregory, deputy chief UK economist with Capital Economics, said the economy is “failing to build up any meaningful momentum.” The third quarter’s performance contrasts sharply with the previous quarter’s growth of 0.3% and the robust 0.7% expansion recorded in the first three months of the year. The economy even shrank by 0.1% just in September, underscoring how difficult a moment the economy is in.
The drop in car manufacturing was the key reason leading to overall economic performance. Fell smothered the political backlash, claiming it would directly decimate the manufacturing sector. This sector is not even fully past the impacts of the supply chain turmoil created by the JLR cyber attack. Suren Thiru, the Institute of Chartered Accountants in England and Wales’ director of economics, said the numbers were a disappointing picture. These dismal numbers should lead all rate-setters to consider the possibility of approving yet another policy easing.
Apart from the manufacturing gloom, the services sector was a bright spot, helping boost economic growth in the quarter. As Liz McKeown has pointed out, this is because services have become the real industrial engine of growth. Business rental and leasing, live events and entertainment, and retail—all sizzling hot. Those gains were somewhat negated by losses in research and development and hair and beauty salons.
Political reactions to the troubling economic data have been swift. Mel Stride, the new Tory shadow chancellor, pilloried his predecessor’s administration in blistering terms. He accused Prime Minister Rishi Sunak and Chancellor Jeremy Hunt of being “in office but not in power.” He underlined the need for urgent, concrete measures to turn the tide.
Labour leader Sir Keir Starmer could hardly have been clearer in his agreement with these ideas. He claimed that the chancellor has forfeited control over the Budget due to a continuing economic storm. This political discussion reflects the high level of urgency that all the players are sensing about the UK’s long term economic direction.
As federal, state, and local policymakers approach 2021 budget debates, there is increased concern—with a glimmer of hope—about possible actions to boost the economy. Rachel Reeves has committed to making “the fair decisions to build a strong economy that helps us to continue to cut waiting lists, cut the national debt and cut the cost of living” during her upcoming budget announcement.