UK Economy Records Zero Growth Between July and September, Revised Data Indicates

Revised official statistics reveal that the UK economy experienced no growth during the period from July to September. This updated data follows a series of disappointing figures, including inflation rising at its fastest pace in eight months and an unexpected contraction of the economy in October. The CBI, one of the UK’s leading business groups, stated that its latest company survey suggested “the economy is headed for the worst of all worlds.” Chancellor Rachel Reeves commented that the challenge to rectify the economy “after 15 years of neglect is huge,” while shadow chancellor Mel Stride remarked that Monday’s figures demonstrated “growth has tanked on Labour’s watch.” This revised figure is expected to be a setback for the government, which has made boosting the economy its primary objective. Labour has pledged to deliver the highest sustained economic growth among the G7 group of the world’s wealthiest nations. Businesses have previously warned that measures announced in October’s Budget, including an increase in employer national insurance contributions (NICs) and a higher minimum wage, could compel them to reduce staffing and increase prices. These budgetary modifications are scheduled to take effect in April. However, Stride noted that the latest figures from the three months preceding the October Budget signal “the warning lights are flashing” regarding the economy’s performance extending into 2025. Reeves stated that Labour’s Budget would “deliver sustainable long-term growth, putting more money in people’s pockets through increased investment and relentless reform.” Daisy Cooper, the Liberal Democrat treasury spokesperson, urged the government to reverse the national insurance tax hike on small businesses and to abolish the business rates system. The CBI, which claims to represent 170,000 firms, reported that its survey, based on responses from 899 firms between November 25 and December 12, found that private sector businesses across all industries anticipated a “steep decline in activity” during the initial three months of 2025. “Expectations are now at their weakest in over two years,” said Alpesh Paleja, the CBI’s interim deputy chief economist. A separate survey conducted by the British Retail Consortium, an organization representing UK retailers ranging from Marks and Spencer to Tesco, indicated a forthcoming “January spending squeeze on the horizon” for consumers. According to its consumer sentiment survey, the consortium reported that “public confidence in the state of the economy took a nosedive” this month. “With sales growth unable to keep pace, retailers will have no choice but to raise prices or cut costs – closing stores and freezing recruitment,” said Helen Dickinson, chief executive of the BRC. Mick Dore, general manager of the Alexander pub in Wimbledon, mentioned that the establishment’s expenses would increase in April due to the elevated national insurance contributions it makes for its 50 to 60 staff. “All of December we’ve been crazy busy with loads and loads of work parties,” he told BBC Breakfast. “There are cost implications going forward and we have to have a good Christmas to insulate ourselves against that.” However, he expressed optimism regarding business prospects for the upcoming year. “I generally think as a whole we are going to be ok. I’ve been around a long time now and each time they’ve told me the end is nigh it never has been.” Paul Dales, chief economist at Capital Economics, observed that there was “no doubt that some business and households put spending and investment on hold around the Budget.” Yet, he noted that it was “too soon to see any genuine effect of Labour policies.” He indicated that the negative impact from elevated interest rates would eventually be superseded by the positive effect of reduced rates, anticipating an improvement during the latter half of next year. Simon French, chief economist at Panmure Liberum, stated that the updated figures align “with a lot of other indicators we’ve seen since the July general election that’ve shown a loss of momentum in the economy.” He raised the question of whether this represented a standard slowdown, similar to those observed after prior general elections that subsequently recovered, or “whether this is something more problematic teeing up a recession next year.” On Thursday, the Bank of England opted to maintain interest rates, declaring its assessment that the UK economy had underperformed expectations, exhibiting no growth whatsoever from October to December. Gross domestic product (GDP), which quantifies all economic activity by companies, governments, and individuals within the nation, is the metric used to assess the UK economy. The ONS issues preliminary estimations of the UK’s economic performance and subsequently revises these figures upon acquiring additional data. Additionally, on Monday, it adjusted downwards the growth statistics for the period from April to June, from 0.5% to 0.4%. It reported that the economy was weaker than initially projected, attributing this to underperformance by establishments such as bars and restaurants, legal practices, and advertising agencies. “Real household disposable income per head showed no growth,” ONS director of economic statistics Liz McKeown said.