Rachel Reeves describes ‘challenge’ of fixing UK economy as ‘huge’

Chancellor Rachel Reeves has described the “challenge” of fixing the economy as “huge”, after revised official figures showed that the UK economy flatlined in the third quarter of the year.

The Office for National Statistics said on Monday that UK gross domestic product (GDP) showed no growth between July and September.

The Conservatives have claimed that “growth has tanked” on the Government’s “watch”, and said that the economy is becoming “more vulnerable”.

Statisticians, who had previously estimated 0.1% growth for the quarter, partly blamed the reduction on fresh survey data showing weaker trading across bars and restaurants.

Revised down

The ONS also revised down its growth reading for the second quarter of 2024, to 0.4%. In September, it said it thought GDP had increased by 0.5%, which was itself a reduction on previous estimates.

The numbers will be a blow to ministers who have pledged to grow the economy, and come as businesses issued a warning that the UK is “headed for the worst of all worlds”.

Reacting to the figures on Monday morning, Ms Reeves said in a statement: “The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge.

“But this is only fuelling our fire to deliver for working people.

“The Budget and our plan for change will deliver sustainable long-term growth, putting more money in people’s pockets through increased investment and relentless reform.”

The figures released on Monday cover July to September, before the Chancellor’s first Budget which came at the end of October.

Contracted

They come after numbers released earlier in December which showed that the UK economy unexpectedly contracted in October, marking two months of negative growth for the first time since the pandemic.

Mel Stride, the shadow chancellor, said that “warning lights are flashing” on the economy.

“Having inherited the fastest-growing economy in the G7, growth has tanked on Labour’s watch,” Mr Stride said in reaction to Monday’s data.

“That means greater pressure on our public finances and an economy which, far from becoming more secure, is becoming significantly more vulnerable.

“The Labour Government must now urgently revisit their disastrous budget and align economic policy with growth not decline. Every moment of delay is further damaging business confidence, output and employment.

“The warning lights are flashing.”

The interim deputy chief economist at the CBI has said that the “economy is headed for the worst of all worlds” after a major survey which contains “little festive cheer”.

National insurance hike

They found that firms expected to reduce both output and hiring. The Chancellor’s hike to employers’ national insurance, set to rake in around £25 billion a year, was highlighted as one of the reasons for the gloomy outlook.

The CBI’s growth indicator survey, based on responses from 899 companies between November 25 and December 12, found expectations for growth are now at their weakest since November 2022 in the aftermath of Liz Truss’s chaotic tenure in No 10.

Alpesh Paleja, the CBI’s interim deputy chief economist, said: “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.

“As we head into 2025, firms are looking to the Government to boost confidence and to give them a reason to invest, whether that’s long overdue moves to reform the apprenticeship levy, supporting the health of the workforce through increased occupational health incentives or a reform of business rates.

“In the longer term, businesses will be looking to the industrial strategy to provide the stability and certainty which can unlock innovation and investment – and provide that much-needed growth for the economy which can deliver prosperity for firms and households alike.”