The UK economy saw minimal growth in the third quarter of 2024, following a more positive start to the year. GDP only increased by 0.1% from July to September, compared to 0.5% in the second quarter and 0.7% in the first. This lackluster performance can be attributed to a decline in industrial output, manufacturing, and services, indicating a decrease in both business and consumer confidence leading up to the Budget announcement.
In September, GDP actually fell by 0.1% after a slight growth of 0.2% in August and no change in July. This downward trend doesn’t bode well for the fourth quarter, especially with the potential impact of the fiscal policies outlined in the Budget. Some businesses may scale back operations in response to the announced increases in employer National Insurance and other measures. However, the upcoming Christmas season could provide a much-needed boost for sectors that cater to consumers.
Despite the challenges, there is hope that additional government spending will stimulate economic activity in 2025 before tapering off. The overall growth outlook remains stagnant, with the economy struggling under high interest rates. As employment costs are expected to rise, businesses and households are likely to face increasing financial pressures. GDP per head, a key measure of living standards, is also on the decline, highlighting the need for policies that can boost investment and productivity.
The disappointing economic data has raised the possibility of a further interest rate cut at the Bank of England’s December meeting. However, there is still a consensus among Monetary Policy Committee members to hold off on any changes as they assess the inflationary effects of the Budget decisions. It is clear that decisive actions are needed to restore confidence and spur growth in the economy.
In conclusion, the recent economic figures reflect a challenging environment for businesses and households alike. While uncertainties remain, there is an opportunity for policymakers to implement measures that can support economic recovery and improve the overall well-being of the population. It is crucial to address the current issues promptly to pave the way for a more sustainable and prosperous future.
