LONDON, Nov 15 (Reuters) – The UK economy experienced minimal growth between July and September, with uncertainty surrounding the Budget being cited as a key factor for the weak performance.
The economy grew by just 0.1% over the three-month period and contracted in September. Chancellor Rachel Reeves expressed dissatisfaction with these figures, which cover the first three months of the new Labour government, despite the party’s commitment to boosting economic growth.
Businesses have criticized the Budget’s tax increases, arguing they will lead to higher prices and fewer jobs. Major companies like Marks & Spencer, Sainsbury’s, and JD Sports have indicated they may raise prices due to the changes.
The latest growth figure was weaker than expected, marking a sharp slowdown from the 0.5% growth seen from April to June. Economists noted that concerns about the contents of October’s Budget influenced the behavior of firms and households.
Ben Jones, lead economist at the CBI business group, reported a “slowdown in decision making” prior to the Budget, which he said had “set off warning lights for business” once announced. He added that the increase in National Insurance Contributions and the rise in the minimum wage are expected to prompt a more cautious approach to pay, hiring, and investment.
Ruth Gregory, deputy chief UK economist at Capital Economics, observed that the economy has only grown in two of the past six months, but she does not believe the UK is on the brink of another recession.
Chancellor Reeves emphasized that growth is the government’s “number one mission” and aims for it to be felt by families across the UK. She dismissed accusations of talking down the economy ahead of the Budget, stating that the UK has seen minimal growth for over a decade.
Shadow Chancellor Mel Stride blamed Labour’s policies for the significant slowdown in growth, urging the government to act before broken promises lead to further tax increases. Liberal Democrat Treasury spokesperson Daisy Cooper described the growth figures as “disappointing” and warned that the Budget’s tax rises could be detrimental to struggling small businesses.
The UK government aspires to be the fastest-growing economy among the G7 nations. For the July to September period, the UK ranks fifth in the G7, behind the US, France, Germany, and Japan, but ahead of Italy. Canada has yet to release its growth figure. The Office for National Statistics (ONS) reported subdued growth across most industries, with the services sector, which dominates the UK economy, growing by just 0.1% over the three months and showing no growth in September.
In October, Reeves presented a “Budget for growth,” but the Office for Budget Responsibility stated that the measures would only provide a temporary boost to the UK economy, with the size of the economy expected to remain largely unchanged in five years compared to previous estimates.
On Thursday, Reeves announced plans to reform the pensions industry to drive investment into UK companies and infrastructure. She also called on UK regulators to focus more on growth to help boost the economy, stating, “The UK has been regulating for risk, but not regulating for growth.”
