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Office for National Statistics (ONS) data shows that the economy grew by just 0.1% between July and September, falling back from the 0.5% growth seen between April and June.
The stalling of growth is being blamed on the worries in the economy over the potential tax rises that were being anticipated in Labour’s first budget in October. Labour made boosting economic growth its top priority when it came into power but Chancellor Rachel Reeves said she was ‘not satisfied’ with these latest figures which cover the first three months of the new government.
Responding to the latest GDP data, Ben Jones, Lead Economist at the Confederation for British Industry (CBI), said “The UK economy stalled over the third quarter. Uncertainty ahead of the Budget probably played a big part, with firms widely reporting a slow-down in decision making. Hopefully this will prove to be a blip. We still expect the economy to return to a path of modest growth in the year ahead. But downside risks to the outlook have increased.
“The Budget has set off warning lights for business. The hike in National Insurance Contributions alongside other increases to employers’ cost base will add to the burden on business. And it is expected to trigger a more cautious approach to pay, hiring and investment as companies work through what it means for their own budgets.
“The Government must stay the course to drive long-term growth with policies that give business certainty and confidence to invest. Firms are looking for signs of progress on its Industrial Strategy, for example, or on reforms to business rates and the apprenticeship levy. By prioritising these the government can unlock much needed private sector investment in our infrastructure and net zero transition.”
David Bharier, Head of Research at the British Chambers of Commerce said “Today’s preliminary GDP data for Q3 at 0.1% suggests economic growth has lost some momentum in the second half of 2024.
“Our latest research has shown business confidence falling back amid a spike in anxiety over tax and employment policy. Meanwhile geopolitical uncertainty continues to make international trading conditions challenging.
“Last month’s Budget gave UK businesses some welcome indication of the Government’s long-term framework to boost growth. However, our early feedback from businesses suggest many will not be able to stomach the raft of new costs.
“SMEs now face making tough decisions to deal with the increase in National Insurance Contributions, the rise in the National Living Wage and the impact of the Employment Rights Bill.
“Sustained economic growth can only come through business. That’s why it’s crucial that we see decisive and inclusive action at pace from the Government to unlock investment. A lot is riding on the detail of the industrial and trade strategies in the months ahead.”
Suren Thiru, ICAEW Economics Director said “These figures suggest that the economy went off the boil even before the budget, as weaker business and consumer confidence helped weaken output across the third quarter, particularly in September.
“Following a ‘gangbusters’ first half of the year, the third quarter outturn paints a more realistic picture of the UK’s underlying growth trajectory given longstanding challenges over poor productivity and persistent supply side constraints.
“Economic growth in the final quarter of this year is likely to be similarly modest with looming tax rises and growing global uncertainty likely to spark a renewed restraint to spend and invest, despite lower interest rates.
“In spite of these downbeat figures, a December policy loosening looks improbable as rate setters will likely be concerned enough over inflation risks from the budget and growing global headwinds to resist signing off back-to-back interest rate cuts.”