UK economy flatlines but avoids recession this year
The UK economy has flatlined but has avoided a recession this year as the chancellor warned high inflation remained the main obstacle to growth.
Fresh data from the Office for National Statistics shows that gross domestic product (GDP) – which measures the value of goods and services produced – rose by 0.2% over the month, amid a boost from the film production, health and education industries although growth in August was revised down to 0.1% from 0.2%.
While the figures indicate the economy failed to grow at all in the third quarter, it does mean the UK dodges a recession this year which is defined as two consecutive quarters of negative GDP.
Analysts had predicted a 0.2% fall for the latest period.
Economists said the manufacturing and construction sectors particularly helped to support growth over the end of the quarter.
Sclerotic growth gives chancellor little room for manoeuvre
Zero growth in the third quarter of 2023 was marginally better than expectations of a small contraction, but confirmed the UK’s flatlining post-COVID economic trajectory.
There may be some relief that the prospect of recession, predicted by the Bank of England among others earlier in the year, has receded, but there is precious little to celebrate beneath the headline figure.
The torpor in the three months to September affected all significant sectors more or less equally.
Services activity fell by 0.1% cancelling out a 0.1% increase in construction, while production was flat.
Meanwhile, spending by companies, individuals and the public sector, was depressed, with business investment, household and government spending all down.
This may further evidence that the interest rate increases pushed through by the Bank of England to tackle inflation are biting, making everyone more cautious, but it also underlines the challenge to the chancellor two weeks out from his autumn statement.
Jeremy Hunt has made clear that a growing economy is the key to any significant move, whether to stimulate business growth or consumer spending via tax cuts, which he has consistently ruled out to the dismay of Conservative backbenchers.
Sclerotic growth gives him very little room for manoeuvre, or much chance to change the course of an economy that appears to be adrift, waiting for the weather to change.
ONS director of economic statistics Darren Morgan said: “The economy is estimated to have shown no growth in the third quarter.
“Services dropped a little with falls in health, management consultancy and commercial property rentals.
“These were partially offset by growth in engineering, car sales and machinery leasing.
“In the month of September the economy grew slightly, with increases in film production, health and education.
“This growth was partially offset by falls in retail and computer programming.”
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‘Inflation is still too high’
The Bank of England said last week it expected zero growth in the economy next year but kept interest rates at a 15-year high as it continued to battle an inflation rate more than three times its 2% target.
The central bank had forecast a flat reading for growth in the third quarter.
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Responding to the latest ONS data ahead of the autumn budget statement on 22 November, Jeremy Hunt said: “High inflation is the single greatest barrier to economic growth.
“The best way to sustainably grow our economy right now is stick to our plan and knock inflation on its head.
“The autumn statement will focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs.”
Labour’s shadow chancellor Rachel Reeves said: “These figures are further evidence that the economy is not working under the Conservatives and working people are worse off.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The economy narrowly avoided contracting in Q3, and we continue to think that it can maintain this resilient performance in Q4.
“We continue to think that the chances of a recession look low.”
Business
Energy bills to rise again from January but spring falls to come, research firm Cornwall Insight forecasts
Energy bills are to rise again next year, according to a respected forecaster.
Costs from January to March are projected to rise another 1% to £1,736 a year for the average user, according to research firm Cornwall Insight.
The energy price cap, which sets a limit on how much companies can charge per unit of electricity, is also expected to rise, costing typical households an extra £19 a year.
It’s a further increase after energy costs rose 10% from October.
After the latest hike, there were hopes of a fall in the new year, but volatile wholesale gas and electricity markets are still above historic average costs.
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Prices have gone up due to supply concerns arising from Russia‘s war in Ukraine, and maintenance of Norwegian gas infrastructure.
But spring is expected to herald a reduction as is October 2025, Cornwall Insight said.
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Every three months energy regulator Ofgem revises the cap based on wholesale costs.
The official January price cap announcement will be made on Friday.
It comes as millions of pensioners lost their automatic winter fuel allowance payment after the government means-tested the benefit.
Meanwhile, Cornwall Insight’s principal consultant Dr Craig Lowrey warned “millions” of households won’t heat their homes to “recommended temperatures, risking serious health consequences” with bills on the rise.
“With it being widely accepted that high prices are here to stay, we need to see action,” he said, suggesting options like cheaper rates for low-income homes, benefit restructuring, or other targeted support for the vulnerable “must be seriously considered”.
The energy price cap system is being reviewed by Ofgem with possible changes to the standing charge coming over the next year.
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The long-lasting solution to high energy bills is the transition to UK-produced renewable power, the firm said.
“While there will be upfront costs, this shift is essential to building a sustainable and secure energy system for the future.”
The owners of Scotland’s only oil refinery have rejected a US-led approach about a possible bid for it months before its scheduled closure.
Sky News has learnt that a consortium said to be led by Robert McKee, an American energy industry veteran, wrote to Petroineos, the owner of the Grangemouth site, to express an interest in buying it.
The approach, which is understood to have been made earlier this month, was rejected by Petroineos, which is 50%-owned by the petrochemicals empire founded by the Manchester United FC shareholder Sir Jim Ratcliffe.
The consortium is understood to comprise The Canal Group, which is reportedly developing a green energy refinery in Texas, and Trading Stack, a Middle East-based commodities trader.
Mr McKee spent nearly four decades with ConocoPhillips, one of the biggest energy companies in the US.
Sources close to the situation said that Petroineos had rebuffed the offer in order to concentrate on a publicly announced plan to transform the century-old plant into a finished fuels import terminal.
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They added that the nature of the consortium’s approach had raised questions about its access to financing and expertise in operating an asset of this kind.
The Grangemouth refinery, which employs about 450 people, loses about £200m annually.
Its other shareholder is the state-backed Chinese energy giant PetroChina.
The site is due to close next year.
A person close to the consortium insisted that its financing was robust and said it would assess the feasibility of building a new refinery elsewhere in the area.
They added that the consortium had had “positive interactions” with trade union officials, and believed that there was scope to rapidly make Grangemouth’s refinery operations profitable.
On Monday, a spokesman for Petroineos said: “Since the Petroineos joint venture was formed 13 years ago, our shareholders have invested nearly £1bn in the refinery, only to absorb losses of £600m.
“Last week, the refinery lost £385,000 on average each day and we expect to lose more than £150m in total during the course of this year.
“We have not received any credible or viable bids for the refinery.”
A spokesman for the consortium declined to comment.
Cineworld’s hedge fund backers are drawing up plans to return the cinema operator to the public markets amid continuing uncertainty about the future of dozens of its British sites.
Sky News has learnt that the company’s owners are at the early stages of considering a New York listing for the business, with the first half of 2026 considered a likely window for it to take place.
City insiders said that a flotation was likely to encompass Cineworld’s operations outside the UK, with the group’s board expected to consider a sale of the British operations at some point.
They cautioned, however, that no decisions had been reached and would not be for some time.
The fate of Cineworld’s business in the UK has been mired in uncertainty for months, with the company initially exploring a sale of it before turning to a restructuring plan which compromises many of its landlords and other creditors.
It has announced the permanent closure of six sites, but it emerged last month that nearly 20 more were at risk of being shut amid ongoing talks with property owners.
The restructuring plan is due to complete later this month, which some landlords have opposed over the fairness of its terms.
Documents circulated as part of the restructuring plan process highlighted the fact that the company did not have sufficient funding to meet a quarterly rent bill on June 24 of £15.9m.
“Absent this funding, the UK Group would have been insolvent on a cashflow basis,” they said.
Other cinema operators, such as Odeon, are now poised to step in to take over small numbers of Cineworld’s other sites.
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The company trades from more than 100 locations in Britain, including at the Picturehouse chain, and employs thousands of people.
Cineworld grew under the leadership of the Greidinger family into a global giant of the industry, acquiring chains including Regal in the US in 2018 and the British company of the same name four years earlier.
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Its multibillion-dollar debt mountain led it into crisis, though, and forced the company into Chapter 11 bankruptcy protection in 2022.
It delisted from the London Stock Exchange in August 2023, having seen its share price collapse.
In addition to the UK, Cineworld also operates in central and Eastern Europe, Israel and the US.
Cineworld has been contacted for comment.
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