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Britain’s economy stagnated in the first three months of the new Labour government, and was also weaker than expected in the final quarter of the Conservatives’ tenure, new data this morning shows.
The Office for National Statistics has just revised down its estimate of GDP growth in the third-quarter of this year, to 0%, down from 0.1% previously expected. That shows the UK economy flatlined in July-September.
The latest GDP quarterly national accounts report, just released, also shows that real GDP per head fell by 0.2% in Quarter 3 2024, and is 0.2% lower compared with the same quarter a year ago.
On an output basis, the oNS says there was no growth in the services sector in the latest quarter, whilst a 0.7% increase in construction was offset by a 0.4% fall in production.
ONS director of economic statistics Liz McKeown explains: “The economy was weaker in the second and third quarters of this year than our initial estimates suggested with bars and restaurants, legal firms and advertising, in particular, performing less well.
“The household saving ratio fell a little in the latest period, though remains relatively high by historic standards. Meanwhile, real household disposable income per head showed no growth.”
The ONS has also revised down its estimate for growth in April-June to 0.4%, down from 0.5% growth estimated earlier.
The Confederation of British Industry is warning this morning that the UK economy is “headed for the worst of all worlds”, with activity over the next quarter set for a “steep” decline.
And chancellor Rachel Reeves’s budget is being blamed for driving growth expectations down to the weakest level in over two years.
The CBI’s latest growth indicator survey has found that private sector firms expect to cut down on hiring, reduce output and raise prices in the first three months of 2025.
Alpesh Paleja, the group’s interim deputy chief economist, says: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer. Businesses continue to cite the impact of measures announced in the budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment."
There’s also rising gloom in the shopping sector, with the British Retail Consortium predicting that a January spending squeeze is on the horizon.
According to the BRC’s latest Consumer Sentiment Monitor, consumer expectations for the state of the economy over the next three months have fallen.
Helen Dickinson, the chief executive of the British Retail Consortium, says:“Public confidence in the state of the economy took a nosedive …This created a widening gap between expectations of the economy and of people’s own finances, which remained unchanged. Perceptions were heavily skewed by age, with 18- to 35-year-olds considerably more upbeat than older generations on both questions.
"The public’s spending intentions – both in retail and beyond – dropped six points, with expectations of spending in nearly every retail category falling. If these expectations are realised, retailers could find themselves facing a new year spending squeeze just as they unveil their January sales."
The agenda
• 7am GMT: UK GDP quarterly national accounts, UK: July to September 2024
• 1.30pm GMT: Chicago Fed National Activity Index
• 3pm GMT: CB report on US consumer confidence
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