In a troubling turn of events, the UK economy has stagnated in the third quarter of 2024, with the Office for National Statistics (ONS) revising down its estimate of GDP growth to a mere 0%. This marks a disappointing start to the new Labour government’s tenure and raises concerns about the country’s economic trajectory.
Grim Economic Indicators
The latest GDP figures paint a bleak picture of the UK economy:
- Services sector flatlines: The services sector, a key driver of the UK economy, saw no growth in the latest quarter.
- Construction growth offset by production slump: While construction output grew by 0.7%, it was offset by a 0.4% decline in the production sector.
- Household incomes stagnate: Real household disposable income per head showed no growth in Q3, following a 1.4% increase in the previous quarter.
ONS director of economic statistics Liz McKeown noted that the economy was weaker in the second and third quarters than initially estimated, with sectors like hospitality, legal services, and advertising underperforming.
Looming Recession Fears
The grim GDP figures come amidst growing concerns that the UK could be headed for a recession in 2025. The Confederation of British Industry (CBI) has warned that the economy is “headed for the worst of all worlds,” with private sector firms expecting to cut output, reduce hiring, and raise prices in the coming months.
“There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.”
– Alpesh Paleja, CBI interim deputy chief economist
Businesses are pointing fingers at the measures announced in Labour’s October budget, particularly the rise in employer National Insurance contributions, for exacerbating an already weak demand environment. Tory business spokesman Andrew Griffith has gone so far as to claim that if the UK falls into recession, it will be one “made in Downing Street.”
Challenges Ahead for Labour
The dismal economic news presents a significant challenge for Rachel Reeves and the Labour government. The Chancellor acknowledged the enormity of the task ahead, stating:
“The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge.”
– Rachel Reeves, Chancellor of the Exchequer
Despite defending the budget measures, Labour Commons leader Lucy Powell admitted that the state of the economy is “disappointing” and that she understands the public’s frustration with the government’s performance thus far.
As the UK teeters on the brink of recession, all eyes will be on the Labour government to see if they can deliver on their promises of sustainable long-term growth and increased investment. With business confidence waning and economic indicators flashing red, the road ahead appears fraught with challenges. The question remains: can Labour steer the UK economy away from the “worst of all worlds” scenario, or will their tenure be marred by an economic downturn that many are already calling a “recession made in Downing Street”?
