Revised figures show that the UK’s economy registered zero growth between July and September, marking a period of stagnation as both the services and production sectors experienced notable declines.
According to the Office for National Statistics, the economy’s quarter-on-quarter gross domestic product (GDP) growth rate stood at 0% in the third quarter, down from 0.4% in the previous quarter and below analysts’ expectations of 0.1%. The downturn was largely driven by a lack of growth in the services sector, particularly in insurance and finance, as well as a 0.4% drop in production, primarily due to a decline in gas, electricity, air conditioning, and steam supply.
The stagnation is fueled by growing fears of an impending recession, worsened by changes introduced by the newly elected UK Labour government following its win in July. Some of these measures, including higher employer national insurance contributions (NICs), have caused businesses to reassess their budgets as the new year approaches.
Alpesh Paleja, interim deputy chief economist at the Confederation of British Industry (CBI), commented on the challenging economic outlook: “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.”
Exports fell by 0.5%, while imports decreased by 2.5%. However, a slight rise in net trade helped offset some of the decline. Construction activity showed modest improvement but not to the extent expected. Household spending remained steady at 0.5%, reflecting more cautious consumer behavior ahead of the holiday season.
Despite the overall stagnation, business investment saw a positive shift, rising by 1.9% in Q3 2024 compared to 1.2% in the previous quarter, though government consumption increased at a much slower rate than anticipated.
