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The UK economic system barely expanded within the third quarter because the dominant providers sector misplaced momentum, underlining the problem going through the Labour authorities, which has put development on the centre of its agenda.
The economic system grew 0.1 per cent within the quarter, the Workplace for Nationwide Statistics mentioned on Friday, in contrast with an enlargement of 0.5 per cent within the second quarter. The determine was beneath economists’ expectations of 0.2 per cent.
GDP shrank 0.1 per cent in September as manufacturing output fell.
Chancellor Rachel Reeves signalled her discontent with the determine, which recorded the nation’s financial output throughout Labour’s first three months in workplace because it gained the July 4 common election.
“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she mentioned after the info launch.
Labour has promised to “secure the highest sustained growth in the G7” throughout its time period of workplace and Prime Minister Sir Keir Starmer mentioned earlier than the election that he needed development of two.5 per cent a yr.
However in the course of the third quarter of this yr, the providers sector, which accounts for about 80 per cent of the economic system, expanded simply 0.1 per cent, down from 0.6 per cent within the earlier interval.
“Growth has gone down a gear in the third quarter,” mentioned Scott Gardner, an funding strategist at JPMorgan-owned digital wealth supervisor Nutmeg.
Sterling was little modified at $1.2680 after the publication of the figures. The yield on the two-year gilt rose 0.01 share factors to 4.4 per cent.
Reeves’ Funds late final month elevated taxes and borrowing in what Labour mentioned was a bid to restore public funds and enhance public providers. However many companies say the rise in employers’ nationwide insurance coverage contributions will hit job creation and may lead corporations to reduce funding plans.
The economic system has misplaced momentum because the first quarter, when it grew 0.7 per cent and rebounded from a technical recession on the finish of 2023. Economists mentioned the slowdown confirmed the persistent challenges of low productiveness and nonetheless excessive rates of interest.
UK productiveness, measured as output per hour labored, fell 1.8 per cent within the third quarter from the identical interval a yr earlier and was barely above the degrees recorded earlier than the monetary disaster, separate figures from the ONS on Friday confirmed.
Suren Thiru, economics director on the Institute of Chartered Accountants in England and Wales, mentioned the third-quarter figures “paint a more realistic picture of the UK’s underlying growth trajectory” than the earlier figures touted by former prime minister Rishi Sunak of OECD average-beating development.
GDP per capita, a greater measure of dwelling requirements which takes into consideration inhabitants modifications, contracted by 0.1 per cent in contrast with the earlier quarter and stays 0.7 per cent beneath its pre-pandemic degree.
The Financial institution of England expects development to stay lacklustre within the closing quarter of the yr and has forecast a 0.3 per cent enlargement. Earlier this month, the BoE lower curiosity to 4.75 per cent however indicated {that a} additional discount in borrowing prices was unlikely earlier than early subsequent yr, because it weighs the outlook for inflation.
Earlier surveys confirmed that client confidence fell within the run-up to October’s Funds as customers anticipated tax will increase. Nonetheless, the ONS knowledge confirmed resilience amongst customers as easing value pressures helped family spending rise 0.5 within the third quarter, up from 0.2 per cent within the second.
Output in consumer-facing providers industries, similar to bars and eating places, rose 0.5 per cent within the third quarter and enterprise funding climbed 1.2 per cent.
The development sector expanded by 0.8 per cent within the quarter.
The UK’s quarter-on-quarter GDP determine for the three months to September compares with a 0.7 per cent enlargement within the US and 0.4 per cent within the Eurozone.
