The prospect of swift financial restoration stays elusive, Sir Keir Starmer warned on Monday, as official figures confirmed the UK financial system stagnated within the third quarter.
Downing Road stopped wanting denying the opportunity of additional tax rises, fuelling considerations amongst companies that the federal government’s bundle of fiscal measures may not be sufficient to regular the ship.
Knowledge from the Workplace for Nationwide Statistics (ONS) confirmed gross home product (GDP) flatlined at 0.0% between July and September, down from an preliminary estimate of 0.1% progress. The revision raises the spectre of recession, significantly after the ONS downgraded second-quarter progress to 0.4% from 0.5%. The authorized and promoting sectors, together with pubs and eating places, had been cited as the principle drags on output.
Paul Dales, chief UK economist at Capital Economics, famous that regardless of a robust first half of the yr, momentum has dissipated. “The economy ground to a halt in the second half of the year due to lingering higher interest rates, weaker overseas demand and concerns over the budget,” he mentioned. Dales expects 2025 to be “a better year” however warns that the financial system is dropping steam within the ultimate months of 2024.
With Paul Johnson, director of the Institute for Fiscal Research, cautioning that Labour’s Chancellor, Rachel Reeves, might should “come back for more money” from the general public, the federal government has been reluctant to rule out additional tax hikes. When pressed, Starmer’s spokesman highlighted Reeves’s assertion that her October funds was “once-in-a-parliament” and had “wiped the slate clean” by addressing a £22 billion fiscal shortfall. But he admitted the chance stays that extra tax rises could possibly be essential.
Reeves’s inaugural funds launched round £40 billion in tax will increase, together with a £25 billion rise in employers’ nationwide insurance coverage contributions. The measures have been linked to faltering enterprise confidence, with the Confederation of British Trade reporting its weakest progress forecasts since November 2022. The Financial institution of England additionally revised its fourth-quarter outlook all the way down to 0.0% from 0.3%, indicating a stalling financial system within the latter a part of 2024.
Starmer’s spokesman insisted the federal government is laser-focused on spurring financial progress that “delivers for working people,” however acknowledged that fixing the injury accomplished over the previous 15 years “won’t happen overnight.” Reeves echoed this sentiment, describing the dimensions of the duty as “huge” however including that it has solely intensified Labour’s dedication to “deliver for working people.”
Liz McKeown, the ONS’s director of financial statistics, defined that the continued weak spot throughout key service sectors is compounding the slowdown. In the meantime, though family disposable revenue rose yearly by 4.5% within the third quarter, the financial savings ratio stays effectively above its pre-pandemic common, hinting that many households are bracing for additional monetary turbulence.
