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The UK economic system barely expanded within the third quarter because the dominant companies sector misplaced momentum, underlining the problem dealing with the Labour authorities that has put development on the centre of its agenda.
The economic system grew 0.1 per cent within the quarter, the Workplace for Nationwide Statistics mentioned on Friday, in contrast with an enlargement of 0.5 per cent within the second quarter. The determine was under economists’ expectations of 0.2 per cent.
The companies sector, which accounts for about 80 per cent of the economic system, expanded 0.1 per cent, overshadowing a 0.8 per cent enlargement within the building sector.
In an indication of how momentum pale over the three-month interval, the economic system contracted 0.1 per cent in September, largely due to falling manufacturing output.
In her Funds late final month, chancellor Rachel Reeves elevated taxes and borrowing in what Labour mentioned was a bid to restore public funds and enhance public companies. However many companies say the rise in employers’ nationwide insurance coverage contributions will hit job creation and may lead corporations to cut back funding plans.
Following the discharge of the information on Friday, Reeves mentioned: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.”
Sterling was little modified at $1.2680 after the publication of the figures.
Suren Thiru, economics director on the Institute of Chartered Accountants in England and Wales, mentioned the third-quarter figures “paint a more realistic picture of the UK’s underlying growth trajectory given long-standing challenges over poor productivity and persistent supply side constraints”.
The UK’s quarter-on-quarter GDP determine for the three months to September compares with a 0.7 per cent enlargement within the US and 0.4 per cent within the Eurozone.
“Growth has gone down a gear in the third quarter,” mentioned Scott Gardner, an funding strategist at JPMorgan-owned digital wealth supervisor Nutmeg.
Surveys confirmed that shopper confidence fell within the run-up to October’s Funds as customers anticipated tax will increase. Nonetheless, the ONS knowledge on Friday confirmed that shopper spending rose 0.5 within the third quarter, up from 0.2 per cent within the second. Enterprise funding additionally expanded by 1.2 per cent.
The Financial institution of England expects development to stay lacklustre within the remaining quarter of the yr and has forecast a 0.3 per cent enlargement. It had predicted development of 0.2 per cent within the second quarter.
Earlier this month, the BoE lower curiosity to 4.75 per cent however indicated {that a} additional discount in borrowing prices was unlikely earlier than early subsequent yr, because it weighs the outlook for inflation.
Easing worth pressures led to a pick-up in family spending within the first quarter of the yr, serving to the economic system rebound from a technical recession on the finish of 2023.
