UK Economy Shows Minimal Growth Amid Budget Uncertainty
The UK economy experienced minimal growth of just 0.1% between July and September, with economic uncertainty surrounding the recent Budget being cited as a key factor in the weak performance. The growth rate represents a significant slowdown from the 0.5% expansion seen in the previous quarter.
Chancellor Rachel Reeves, despite Labour’s priority of boosting economic growth, acknowledged she was “not satisfied” with these figures, which cover the first three months of the new government. The economy actually contracted during September, raising concerns about its overall health.
Economists and business leaders have highlighted several factors contributing to the sluggish growth. Ben Jones from the CBI business group reported that firms experienced a notable “slowdown in decision making” prior to the Budget, with the subsequent announcements setting off “warning lights for business”. The increase in National Insurance Contributions and other measures are expected to trigger a more cautious approach to hiring, pay, and investment.
Major companies like Marks & Spencer and Sainsbury’s have already indicated potential price increases in response to the Budget changes. This uncertainty appears to have created a wait-and-see attitude among businesses and consumers.
Andy Crisp, a restaurant manager in Manchester, exemplified this sentiment, noting a noticeable downturn in footfall the week before the Budget. He observed a sense of nervousness among customers about potential economic implications.
The services sector, which comprises over three-quarters of the economy, performed particularly weakly. Economists expect the economic outlook to remain challenging. Luke Bartholomew from Abrdn noted that while some economic slowdown was anticipated, the extent was more pronounced than expected.
In October, Reeves presented what she termed a “Budget for growth”. However, the independent Office for Budget Responsibility (OBR) provided a more measured assessment. The OBR predicted that the Budget measures would only “temporarily boost” the UK economy and that the overall economic size would remain “largely unchanged” in five years.
The weak growth figures have prompted criticism from businesses, who argue that tax rises will negatively impact employment and potentially increase prices. This creates a challenging environment for economic recovery.
The situation reflects broader economic uncertainties, with businesses and consumers alike seeming cautious about making significant financial decisions. The minimal growth underscores the complex economic challenges facing the UK, including the potential impacts of recent fiscal policies and ongoing economic uncertainties.
As the government continues to seek strategies for economic growth, these latest figures will likely prompt further discussions about effective economic management and policies to stimulate economic activity.
