The latest revised figures from the Office for National Statistics (ONS) reveal that the UK economy experienced zero growth between July and September 2023. This stagnation comes as the Bank of England announced that growth during the final quarter of the year is also expected to be flat, reflecting a broader trend of declining economic activity. The disappointing data has raised concerns among business leaders and economists about the future trajectory of the economy.
The ONS typically releases initial estimates of the UK’s economic performance, which are subject to revision as more data becomes available. In this case, the previous growth figure for April to June was adjusted downward from 0.5% to 0.4%. Coupled with this, a series of troubling indicators, including an unexpected contraction in October and inflation rising at its fastest pace in eight months, have led to increased scrutiny of the economic landscape.
The Confederation of British Industry (CBI), the UK's leading business group representing around 170,000 firms, has expressed deep concern regarding the current situation. The CBI's latest company survey revealed that private sector businesses across all industries anticipate a "steep decline in activity" in the first quarter of 2025. This survey was based on responses from 899 firms collected between November 25 and December 12.
"The economy is headed for the worst of all worlds," CBI stated.
Alpesh Paleja, CBI's interim deputy chief economist, noted that expectations among businesses have reached their lowest point in over two years. He emphasized that this pessimism is indicative of broader issues affecting economic confidence.
"Expectations are now at their weakest in over two years," Alpesh Paleja remarked.
Additionally, the British Retail Consortium (BRC) has indicated that a "January spending squeeze on the horizon" could further complicate economic recovery. Helen Dickinson, chief executive of the BRC, stated that public confidence in the economy has significantly deteriorated.
"Public confidence in the state of the economy took a nosedive," Helen Dickinson said.
Dickinson also warned that retailers might be forced to make difficult decisions due to stagnant sales growth. She stated that with sales growth unable to keep pace with rising costs, retailers may have no choice but to raise prices or cut costs, potentially resulting in store closures and hiring freezes.
"With sales growth unable to keep pace, retailers will have no choice but to raise prices or cut costs – closing stores and freezing recruitment," she added.
In light of these developments, Labour has made promises to stimulate economic growth, aiming to deliver the highest sustained growth in the G7 group of wealthy nations. Rachel Reeves, a senior member of the Labour party, articulated this vision by emphasizing the need for sustainable long-term growth that benefits households through increased investment and reforms.
"Deliver sustainable long-term growth, putting more money in people's pockets through increased investment and relentless reform," Rachel Reeves stated.
Meanwhile, Daisy Cooper from the Liberal Democrats proposed specific measures to alleviate pressure on small businesses amid challenging conditions. She advocated for reversing the national insurance tax hike on small businesses and scrapping the current business rates system.
"Reverse the national insurance tax hike on small businesses and scrap the business rates system," Daisy Cooper urged.
As economic indicators continue to trend downward, the focus remains on how policymakers and business leaders will respond to these challenges. The Bank of England’s decision to hold interest rates steady reflects its assessment that economic performance has been weaker than anticipated.