UK GDP flatlined in last quarter, as firms warn economy is heading for ‘worst of all worlds’ – business live

The Conservatives’ warning that Britain could be facing a ‘recession made in Downing Street’ next year makes the front page of two right-leaning newspapers.

The Daily Mail says the CBI’s survey of 899 firms painted a downbeat picture of the country’s economic future…

While The Times leads on an admission from Lucy Powell, the leader of the Commons, that the state of Britain’s stalling economy is “disappointing”.

Powell said she understood the public’s frustration with Labour’s tenure so far, arguing:

“We knew [governing] was going to be difficult.”

“I think the voters and the public knew it was going to be difficult too, that’s why they voted for change because we knew the country was in such a bad situation.

“I can understand people’s frustration. It’s a frustration that I share, because we want to make things better, faster for people.”

This morning’s downgrade to UK growth in July-September comes as business groups warn that activity is set to fall at the start of the new year.

The Confederation of British Industry is warning this morning that the UK economy is “headed for the worst of all worlds”, with activity over the next quarter set for a “steep” decline.

And chancellor Rachel Reeves’s budget is being blamed for driving growth expectations down to the weakest level in over two years.

The CBI’s latest growth indicator survey has found that private sector firms expect to cut down on hiring, reduce output and raise prices in the first three months of 2025.

Alpesh Paleja, the group’s interim deputy chief economist, says:

“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.

Businesses continue to cite the impact of measures announced in the Budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.

Tory business spokesman Andrew Griffith has claimed that if the UK falls into recesion, it will be one “made in Downing Street”.

Responding to the CBI’s survey, Griffith says:

“Since taking office, the chancellor has made this country a hostile climate for aspiration, for investment and for growth.”

The Conservative MP added: “Rachel Reeves’s tax-raising spree and trash-talking her economic inheritance are literally killing businesses and jobs.

“If there is a recession – and based on these CBI expectations that seems increasingly likely – it will be one made in Downing Street. Labour needs to urgently change course before the damage they are doing becomes even greater.”

The Treasury has defended October’s budget, saying the government is delivering the stability that businesses need.

A Treasury spokesperson says:

“More than half of employers will either see a cut or no change in their National Insurance bills.

“We have capped corporation tax at the lowest rate in the G7, provided 40% business rates relief next year for 250,000 properties where there were no plans to do so, launched a 10-year infrastructure strategy and are creating pension mega funds to boost investment in British businesses, infrastructure and clean energy. This is alongside establishing a National Wealth Fund to catalyse over £70bn in investment to drive growth in our to boost investment in British businesses.”

But…there’s also rising gloom in the shopping sector, with the British Retail Consortium predicting that a January spending squeeze is on the horizon.

According to the BRC’s latest Consumer Sentiment Monitor, consumer expectations for the state of the economy over the next three months have fallen:

Helen Dickinson, chief executive of the British Retail Consortium, says:

“Public confidence in the state of the economy took a nosedive…

This created a widening gap between expectations of the economy and of people’s own finances, which remained unchanged. Perceptions were heavily skewed by age, with 18 to 35 year olds considerably more upbeat than older generations on both questions.

The public’s spending intentions – both in retail and beyond – dropped 6pts, with expectations of spending in nearly every retail category falling. If these expectations are realised, retailers could find themselves facing a New Year spending squeeze just as they unveil their January sales.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain’s economy stagnated in the first three months of the new Labour government, and was also weaker than expected in the final quarter of the Conservatives’ tenure, new data this morning shows.

The Office for National Statistics has just revised down its estimate of GDP growth in the third-quarter of this year, to 0%, down from 0.1% previously expected. That shows the UK economy flatlined in July-September.

The latest GDP quarterly national accounts report, just released, also shows that real GDP per head fell by 0.2% in Quarter 3 2024, and is 0.2% lower compared with the same quarter a year ago.

On an output basis, the oNS says there was no growth in the services sector in the latest quarter, whilst a 0.7% increase in construction was offset by a 0.4% fall in production.

ONS director of economic statistics Liz McKeown explains:

“The economy was weaker in the 2nd and 3rd quarters of this year than our initial estimates suggested with bars and restaurants, legal firms and advertising, in particular, performing less well.

“The household saving ratio fell a little in the latest period, though remains relatively high by historic standards. Meanwhile real household disposable income per head showed no growth.”

The ONS has also revised down its estimate for growth in April-June to 0.4%, down from 0.5% growth estimated earlier.

We’ll be tracking more reaction to the state of the economy, on what could be a quiet day as the City winds down for Christmas.

The agenda

• 7am GMT: UK GDP quarterly national accounts, UK: July to September 2024

• 1.30pm GMT: Chicago Fed National Activity Index

• 3pm GMT: CB report on US consumer confidence