Another day, another piece of bad news for the chancellor. The economy shrank in October for the second month in a row. Figures from the Office for National Statistics (ONS) show a 0.1 per cent drop despite speculation that the economy would return to growth following a fall in September. The ONS said pubs, restaurants and retail were among the sectors to report ‘weak’ months. Responding to the news, Rachel Reeves described the figure as ‘disappointing’ – but insisted the government has put in policies that will ‘deliver long-term economic growth’.
However, this has not stopped the political attacks this morning. Shadow chancellor Mel Stride has described the fall in growth as evidence of the ‘stark impact of the chancellor’s decisions and continually talking down the economy’. Business figures are also pointing the finger, with KPMG’s chief economist Yael Selfin citing to ‘uncertainty ahead of the Budget on 30 October’ as a reason businesses and consumers held back on spending. That raises the question of whether November will see an improvement in the GDP figures, given the Budget saw Reeves raise taxes on businesses.
Keir Starmer and Reeves have said that growth is the key aim of this government, so today's figures make for worrying reading. It comes as the Prime Minister has traded talking about going for the ‘fastest growth in the G7’ for ‘raising living standards’ – in a sign that ministers are aware of the difficulties they face getting the economy growing. The question is whether this is a temporary blip or a more long-term trend. Reeves will hope changes to planning rules and a push for investment (including from China and the Gulf States) will lead to long-term growth. But it's clear the negative mood music from the government after the election has had a detrimental effect.
Efforts to pitch Labour's comfortable election win as evidence the UK is a safe port of stability in uncertain times have been overshadowed by dire warnings over the Tories' so-called fiscal black hole. The tax-raising measures (to the tune of £40 billion) in the Budget mean a range of companies say they will slow spending and hiring. The risk is this now impacts consumer confidence too. Add to this a tight spending review and the return of Donald Trump across the pond (who will likely demand countries spend more on defence) and Reeves faces an unenviable task in the coming year.
Katy speaks to James Heale and Isabel Hardman about the latest economic news on this episode of Coffee House Shots:
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