The British economy is shrinking. Figures just released by the Office for National Statistics (ONS) show that GDP fell by 0.1 per cent in the three months to October. The contraction came after growth of 0.1 per cent in the three months to September. On a monthly basis the economy shrank by 0.1 per cent in both September and October after remaining flat in August. Most economists had expected Britain’s economy to grow.
The slow-down was driven by production, which shrank 0.5 per cent, as well as construction, which shrank by 0.3 per cent. Meanwhile, services remained flat. Liz McKeown, Director of Economic Statistics at the ONS, said the production sector slowdown was driven by ‘weakness’ in the car industry. When it comes to services, she said the worst hit areas were wholesale as well as scientific research.
This is not good news for a Chancellor apparently desperate for growth
The news is confirmation of how stagnant Britain’s economy had become in the run-up to Rachel Reeves’s second Budget last month. The uncertain atmosphere created by the leaks and speculation about which taxes would and wouldn’t be hiked led to investors pausing decisions, businesses pulling back on hiring plans and the housing market grinding to a complete standstill. That is reflected in today’s figures. Andrew Griffith, shadow business secretary said:
The fact that economic growth was negative for October is no surprise given the Chancellor was talking the economy down and creating uncertainty with a record long run in to her damaging Budget.
The fall in GDP today means the economy has experienced no growth for four months in a row. Worse still, it has shrunk for more than half of the months that Labour has been in government.
This is not good news for a Chancellor apparently desperate for growth. Nevertheless, there’s a glimmer of hope for mortgages, as our continued weak growth increases the likelihood that the Bank of England will cut interest rates when they meet next week. Markets now expect the Bank’s rate setters to reduce rates to 3.75 per cent.
The figures serve as the final proof, if it were needed, of how damaging the run-up to last month’s Budget proved to be. We can only hope that left alone, Britain’s economy can begin to recover.
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