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The UK economic system did not develop within the third quarter, within the newest blow to a authorities already beneath fireplace from companies for its tax-raising Funds.
GDP didn’t register any development within the three months to September, the Workplace for Nationwide Statistics mentioned on Monday, down from its first estimate of a 0.1 per cent enlargement.
The economic system was held again by the dominant companies sector, which stagnated over the quarter. Manufacturing output fell 0.4 per cent, offsetting a 0.7 per cent enhance within the building sector.
The figures present the economic system stalled within the speedy aftermath of Labour’s July election victory, even earlier than chancellor Rachel Reeves’ Funds dented enterprise confidence.
Reeves on Monday admitted that the federal government confronted a “large” problem however insisted that the Funds had laid the foundations for long-term development.
If development undershoots forecasts made within the Funds, it raises the prospect that the chancellor might must ship spending cuts or greater taxes subsequent yr to make sure she continues to fulfill her borrowing guidelines.
“The problem we face to repair our economic system and correctly fund our public funds after 15 years of neglect is big,” Reeves mentioned. “However that is solely fuelling our fireplace to ship for working folks.”
The federal government has put boosting development on the coronary heart of its agenda, however now faces the risk that the economic system might have contracted within the last quarter of the yr.
In one other signal of the economic system’s weak point, the ONS additionally revised its estimate for second-quarter development down from 0.5 per cent to 0.4 per cent.
Current figures have pointed to a softening within the jobs market, cussed inflation and falling enterprise confidence. GDP shrank 0.1 per cent in October, the second straight month-to-month contraction.
The Financial institution of England final week predicted zero enlargement within the fourth quarter, down from its earlier forecast of 0.3 per cent development.
Paul Dales, on the consultancy Capital Economics, mentioned the downward revision within the third quarter was “primarily as a result of exterior influences quite than the home economic system”, together with a much bigger drag from web commerce.
However he mentioned the general image confirmed development had “floor to a halt . . . as a result of a mixture of the lingering drag from greater rates of interest, weaker abroad demand and a few issues over the insurance policies within the Funds”.
Economists mentioned the main points of the revisions for the quarter have been much less worrying than the general image, nonetheless, with enterprise funding selecting up, shopper spending nonetheless rising at a wholesome tempo, and households now not piling more cash into financial savings.
Elliott Jordan-Doak, senior UK economist on the consultancy Pantheon Macroeconomics, mentioned the revision wouldn’t change the BoE’s pondering on rates of interest, as a lot of the weak point had been in authorities spending and would “fade away” subsequent yr.
Final week Andrew Griffith, shadow enterprise secretary, claimed the UK was heading for a “January of discontent” and the potential of a recession. He mentioned if there was a recession it could be “made in Downing Avenue”.
