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Bank of England in the City of London on November 6, 2024 in London, United Kingdom. The City of London is a city, ceremonial county and local government district containing the main central business district of London CBD. The City of London is widely referred to as the City is also colloquially known as the Square Mile. (photo by Mike Kemp/In Pictures via Getty Images)
Mike Kemp | In Pictures | Getty Images
The British economy failed to achieve any growth in the three months to September, revised figures from the Office for National Statistics of the United Kingdom showed on Monday.
A preliminary estimate for the third quarter, published by the ONS last month, said UK GDP grew by 0.1% during that period. However, final data released on Monday showed 0% GDP growth from the previous quarter.
U British pound it was slightly lower against the US dollar on Monday, trading around $1.2566 at 8:37 am London time.
Monday’s figures dealt another economic blow to Britain, after a series of weak data prints dampened sentiment and raised questions about the elected Labor government’s fiscal strategy.
The beginning of the monthThe ONS data showed that the UK economy contracted unexpectedly by 0.1% in October. It was the second consecutive monthly decline in GDP for the country, after a fall of 0.1% in September.
Looking ahead, Paul Dales, UK chief economist at Capital Economics, said he expected the British economy to stagnate in the last quarter of 2024 – but his view was not entirely pessimistic.
“Overall, these data suggest that, after a strong first half of the year, the economy will slow down in the second half of the year due to a combination of persistent resistance from higher interest rates, weaker overseas demand and some concerns about the politics in the budget,” he said in a note on Monday.
“Our intuition is that 2025 will be a better year for the economy than 2024. But the most recent data suggests that the economy will not have much momentum as the year comes to an end.”
Inflation, meanwhile, appears to be moving higher once again. The ONS said last week that UK inflation had risen to 2.6% in November, marking the second back-to-back month of an upward tick in prices.
The Bank of England kept its key interest rate unchanged stable at 4.75%. While markets did not expect a change in rates at Thursday’s Monetary Policy Committee (MPC) meeting – there was a surprise that three MPC members voted to cut rates (a Reuters poll had predicted only one member votes to cut).
While Governor Andrew Bailey has reported earlier four rate cuts could be possible next year, traders are divided when the Bank of England resumes the drop in interest rates. The LSEG data shows that markets expect another take on the MPC meeting in February, with a small majority of traders expecting rates to be cut by 25 basis points in March.
He comes after UK Finance Minister Rachel Reeves at the end of October He unveiled the Labor government’s first budget since replacing the long-serving Conservative government in July.
The budget included plans by Prime Minister Keir Starmer’s government to raise taxes by £40 billion ($50.5 billion). Reeves said at the time that this would be achieved through a series of new policies, including an increase in employers’ National Insurance payments – a tax on earnings – as well as an increase in capital gains tax and the winter fuel payment scrapping to pensioners.
Some of the policies have been met with widespread criticism. The increase in the national insurance wage tax, for example, prompted warnings from companies that will be less likely to take on new workers, with a report from the recruitment site Indeed before the month that suggested that the policy had already reached the British job openings.
