The UK economy experienced zero growth between July and September, according to revised official figures. This stagnation follows a series of recent economic concerns, including rising inflation and an unexpected contraction in October.
The Confederation of British Industry (CBI), one of the UK’s leading business groups, has indicated that its latest survey of companies suggests the economy is likely to face further challenges. The survey points to declining activity across industries, with expectations for the first quarter of 2025 reaching their lowest levels in over two years. Alpesh Paleja, the CBI’s interim deputy chief economist, highlighted a “steep decline in activity” predicted by businesses.
The government, which has prioritized economic growth, faces increasing pressure as the revised GDP figures show the economy underperforming expectations. The Chancellor, Rachel Reeves, described the task of revitalizing the economy as a significant challenge, citing years of stagnation. Meanwhile, opposition leaders have criticized the government’s handling of the economy, emphasizing the need for sustainable growth policies.
Businesses have raised concerns about upcoming changes from the October Budget, such as increased employer national insurance contributions and a higher minimum wage. These measures, set to take effect in April, could lead to job cuts and rising prices, according to industry groups.
The British Retail Consortium (BRC) reported waning consumer confidence in the economy, with a potential January spending slowdown looming. Helen Dickinson, the BRC’s chief executive, warned that retailers might be forced to raise prices or reduce costs by closing stores and halting recruitment.
The revised GDP data also showed weaker-than-expected performance in specific sectors, including bars, restaurants, legal services, and advertising. The Office for National Statistics (ONS) noted that real household disposable income per head showed no growth during the period.
Economists have expressed mixed views on the outlook for the UK economy. Paul Dales, chief economist at Capital Economics, suggested that while recent data reflects cautious spending and investment, the effects of government policies may take time to materialize. Simon French, chief economist at Panmure Liberum, observed that the figures align with a broader slowdown following the July general election but raised questions about whether this is part of a typical post-election dip or an indication of deeper economic issues.
The Bank of England recently decided to hold interest rates steady, citing weaker-than-anticipated economic performance. It noted that growth stalled between October and December, signaling potential challenges ahead.
The CBI survey underscores concern about the first quarter of 2025, while separate data from the BRC highlights challenges for retailers. As businesses and policymakers navigate these developments, the outlook for the UK economy remains uncertain.
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