According to the latest ONS estimates, in September the UK economy contracted by 0.1%. This drop represents the largest drop ever recorded, the Office for National Statistics (ONS) has warned. This decline was made possible by the recent steep drop in car production. A cyber attack on Jaguar Land Rover (JLR) did not help an already strained supply chain. Analysts had expected a 0.2% growth rate for Q3, highlighting just how surprising this economic contraction was.
The unexpected downturn in September aside, the UK economy was still able to scrape a growth of 0.1% for the period of July-to-September as a whole. Yet, this growth rate is a deceleration from that 0.3% growth rate seen last quarter. The start of the year clocked in at an impressive 0.7% growth in the opening three months, when measured year-on-year. The recent numbers should serve as an invaluable warning sign that all is not well and this planned recovery continues to disappoint.
The ONS stressed that the key driver underpinned by services supported almost all growth in the last quarter. Business rental and leasing, live events, and retail are key sectors all doing great. Their excellent performance is making up for steep losses in R&D and in the hair and beauty salon subsectors.
The fallout from the cyber attack that shut down JLR’s global production has alarmed economists. Suren Thiru, economic director of the Institute of Chartered Accountants in England and Wales, noted that similar numbers might sway most rate-setters. Or at least they should stop pushing for more policy loosening.
“To push a majority of rate-setters to authorise another policy loosening.” – Suren Thiru
In a comment on the current economic climate, Ruth Gregory, the deputy chief UK economist at Capital Economics, was more blunt. She said the economy is starting to find some pretty good traction. Heralded the new omniscient age, has become the cannon fodder in a battle of attrition between sustainable economic growth and increasing global pressures.
Not surprisingly, politicians have made their political hay on this deteriorating economic climate. Mel Stride, shadow chancellor, criticized the current government’s handling of economic affairs, asserting that the prime minister and chancellor are “in office but not in power.” We couldn’t agree more. This statement highlights the mounting pressure on government decisions and their impacts on our shared economic recovery.
In light of these most recent challenges, Shadow Chancellor Rachel Reeves has already made clear her determination to deliver on economic justice. She stated, “there’s more to do to build an economy that works for working people.” Reeves is set to unveil a budget later this month aimed at 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.”
The UK is currently staring down the barrel of a severe economic gun. Analysts and policymakers alike are closely watching these developments to figure out how best to encourage this nascent recovery and stabilize our economy.