The UK economy flatlined in the third quarter of 2024, according to revised official figures released on Monday. UK gross domestic product (GDP) showed no growth between July and September, marking a downbeat development just as Chancellor Rachel Reeves prepared to present her first Autumn budget. This figure was adjusted down from the previously estimated 0.1 percent growth.
The downward revision is not limited to Q3; the Office for National Statistics (ONS) also redrew its growth reading for the second quarter of 2024 to 0.4 percent, down from earlier projections of 0.5 percent. Such revisions paint a concerning picture of the UK economy's performance during these months, leading to criticisms directed toward the Labour government, which came to power earlier this year.
Chancellor Reeves, addressing the media, recognized the enormity of the task at hand: "The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge. But this is only fuelling our fire to deliver for working people. The Budget and our plan for change will deliver sustainable long-term growth, putting more money in people's pockets through increased investment and relentless reform," she stated.
Chief Secretary to the Treasury, Darren Jones, echoed Reeves’ sentiments, describing the current economic statistics as "disappointing" and affirming the government’s “absolute resolve” to collaborate with investors and workers nationwide to stimulate economic growth. "This is our number one mission as a Government, and we start from a disappointing set of economic statistics as we end 2024. So that's why we're going to fight every day to make sure we improve the lives of working people across this country," Jones added.
Simultaneously, the Confederation of British Industry (CBI) released findings indicating businesses expected to lower both output and hiring. The CBI’s interim deputy chief economist, Alpesh Paleja, noted, “There is little festive cheer... firms expect to reduce both output and hiring, and price growth expectations are getting firmer.”
The economic stagnation can be tied to the measures introduced by Labour’s first budget, which included raising the minimum wage and increasing employer national insurance contributions. These changes have been met with skepticism, with industries directly impacted reporting falling demand. Paleja reiterated the industry's call for the government to boost confidence among businesses by implementing supportive policies such as reforming the apprenticeship levy and business rates.
ONS director of economic statistics, Liz McKeown, reflected on the weakness highlighted by the newly revised data, pointing out particularly poor performances from bars, restaurants, legal firms, and advertising sectors. Despite these challenges, she remarked on the household saving ratio, which has fallen slightly but remains historically high. At the same time, real household disposable income per head has stagnated, raising concerns about consumer spending power.
Opposition parties have seized the opportunity to critique the Labour government’s economic management. Shadow Chancellor Mel Stride was quick to join the fray, stating, "Growth has tanked on Labour's watch. Having inherited the fastest-growing economy in the G7, growth has tanked on Labour's watch.” He urged the government to revisit its recent budget, emphasizing the necessity of aligning economic policies with growth rather than decline. Stride warned, "Every moment of delay is damaging business confidence, output and employment. The warning lights are flashing."
The economic outlook remains fraught with caution as the government approaches 2025, seeking ways to reinvigorate growth and improve living standards across the nation. Both the government and business leaders are now calling for collaborative efforts to break the stagnation and steer the UK economy back on course.
