UK economic growth slows to 0.1% in first three months of Labour government
Chancellor Rachel Reeves says growth is the government's number one objective and she is not satisfied with the figures published on Friday
UK economic growth slowed in the first three months of the Labour government, figures from the Office for National Statistics (ONS) show.
The economy grew by 0.1%, lagging behind the 0.5% growth recorded in the previous quarter, between April and June.
Chancellor Rachel Reeves said she was "not satisfied" with the figures, which fell short of economist predictions of 0.2%.
It comes just a few weeks after Reeves unveiled a rise in business taxes in Labour’s first Budget in government last month.
The chancellor said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.
“At my Budget, I took the difficult choices to fix the foundations and stabilise our public finances.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal.”
The services sector, which makes up the bulk of the economy, showed no growth in September and grew by just 0.1% during the period.
Factory output fell 0.2% over the three months driven by a larger decline in the month of September, while the construction sector grew 0.8% over the quarter.
ONS Director of Economic Statistics Liz McKeown said that "production fell overall" in Labour's first GDP quarter figures.
“The economy grew a little in the latest quarter overall as the recent slowdown in growth continued. Retail and new construction work both performed well, partially offset by falls in telecommunications and wholesale. Generally, growth was subdued across most industries in the latest quarter," she said in a statement on Tuesday.“In September the economy shrank a little. Services showed no growth with a notable increase in car sales offset by a slow month for IT companies. Production fell overall, driven by manufacturing, though there was an increase in oil and gas extraction.”
The Shadow Chancellor Mel Stride blamed the UK's slow economic growth on Labour “talking the economy down," he told Times Radio
He said the Government was “reaping, to a degree, what they’ve done” and has followed up with a Budget that has ramped up taxes “that are going to bear down on growth”.
“Across that quarter, across the summer, what the Labour Government did in order to justify what they planned to do all along, which was to substantially hike taxes… it was their mission to talk down the UK economy.
“I’m afraid they’re reaping to a degree what they’ve done in terms of talking the economy down. And of course now what they’ve done is follow it up with a budget that has indeed ramped up taxes, particularly taxes that are going to bear down on growth.”
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How are economists reacting to today's figures?
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the figures suggest the economy “went off the boil even before the Budget”, highlighting a weakness in business and consumer confidence.
“Following a ‘gangbusters’ first half of the year, the third quarter outturn paints a more realistic picture of the UK’s underlying growth trajectory given longstanding challenges over poor productivity and persistent supply side constraints."
Ben Jones, lead economist at the Confederation of British Industry, stated that the uncertainty leading up to the autumn Budget “probably played a big part,” as companies reported a slowdown in their spending decisions.
“Hopefully this will prove to be a blip. We still expect the economy to return to a path of modest growth in the year ahead. But downside risks to the outlook have increased.”
Luke Bartholomew, deputy chief economist at investment giant Abrdn, said: "It is plausible that some of slowing is the result of elevated uncertainty at that time (September), as firms and households speculated about possible tax changes ahead of the Budget."
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