On a production basis, the UK economy grew modestly by 0.1% in Q3 2023. Just a few months ago, all of this data was reported by the Office for National Statistics (ONS). This expansion is below the expectation from analysts, who had predicted a 0.2% growth rate. That’s significantly lower than the previous quarter, which was a surprise quarter of growth at 0.3%. For the first quarter of the year, the economy grew by 0.7%.
Even with the modest increase over the three months from July through September, September was down by 0.1%. It was a sharp decrease in car production that caused the downturn. This drop was particularly driven by a major cyber-attack affecting Jaguar Land Rover. The attack shattered morale and drastically lowered vehicle production. This has become cause for grave alarm over the short and long-term health of the manufacturing sector.
We’re in a dangerous combination of stagflation and vested interests. Ruth Gregory, deputy chief UK economist at Capital Economics, stated that the economy “is struggling to gain decent momentum,” highlighting the challenges faced by various sectors amidst fluctuating growth rates.
The service sector proved to be a main engine for expansion in the most recent quarter. In 2021, business rental and leasing, live events, and the retail sectors were strong performers, according to Liz McKeown. This positive performance was somewhat counterbalanced by declines in research and development as well as hair and beauty salons.
Suren Thiru, economics director for the Institute of Chartered Accountants in England and Wales, expressed concern regarding the potential implications of these economic figures. He indicated that they may be sufficient “to push a majority of rate-setters to authorise another policy loosening,” suggesting that further monetary easing could be on the horizon to stimulate the economy.
Political reaction to the economic data has begun pouring in. Mel Stride, Shadow Chancellor, criticized the current government leadership, stating that Prime Minister and Chancellor are “in office but not in power.” He asserted that Sir Keir Starmer had effectively “stripped the Chancellor of responsibility for the Budget,” reflecting ongoing political tensions amid economic uncertainty.
Further as the government gears up for upcoming fiscal event, Shadow Chancellor Rachel Reeves made the case for a stronger economic baseline. She stated, “there’s more to do to build an economy that works for working people.” In her upcoming Budget announcement, she pledged to take “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.”