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.”
Billionaire Sir Jim Ratcliffe has told Sky News that Britain is ready for a change of government after scolding the Conservatives over their handling of the economy and immigration after Brexit.
While insisting his petrochemicals conglomerate INEOS is apolitical, Sir Jim backed Brexit and spent last weekend with Labour leader Sir Keir Starmer at Manchester United – the football club he now runs as minority owner.
“I’m sure Keir will do a very good job at running the country – I have no questions about that,” Sir Jim said in an exclusive interview.
“There’s no question that the Conservatives have had a good run,” he added. “I think most of the country probably feels it’s time for a change. And I sort of get that, really.”
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Sir Jim was a prominent backer of leaving the European Union in the 2016 referendum but now has issues with how Brexit was delivered by Tory prime ministers.
“Brexit sort of unfortunately didn’t turn out as people anticipated because… Brexit was largely about immigration,” Sir Jim said.
“That was the biggest component of that vote. People were getting fed up with the influx of the city of Southampton coming in every year. I think last year it was two times Southampton.
“I mean, no small island like the UK could cope with vast numbers of people coming into the UK.
“I mean, it just overburdens the National Health Service, the traffic service, the police, everybody.
“The country was designed for 55 or 60 million people and we’ve got 70 million people and all the services break down as a consequence.
“That’s what Brexit was all about and nobody’s implemented that. They just keep talking about it. But nothing’s been done, which is why I think we’ll finish up with the change of government.”
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UK needs to get ‘sharper on the business front’
Prime Minister Rishi Sunak has indicated an election is due this year but Monaco-based Sir Jim is unimpressed by the Conservatives’ handling of the economy.
“The UK does need to get a bit sharper on the business front,” he said. “I think the biggest objective for the government is to create growth in the economy.
“There’s two parts of the economy, there’s the services side of the economy and there’s the manufacturing side. And the manufacturing, unfortunately, has been sliding away now for the last 25 years.
“We were very similar in scale to Germany probably 25 years ago.
“But today we’re just a fraction of where Germany is and I think that isn’t healthy for the British economy… particularly when you think the north of England is very manufacturing based, and that talks to things like energy competitiveness, it talks to things like, why do you put an immensely high tax on the North Sea?
“That just disincentivises people from finding hydrocarbons in the North Sea, in energy.
“And what we need is competitive energy. So I mean, in America, in the energy world, in the oil and gas world, they just apply a corporation tax to the oil and gas companies, which is about 30%. And in the UK we’ve got this tax of 75% because we want to kill off the oil and gas companies.
“But if we don’t have competitive energy, we’re not going to have a healthy manufacturing industry. And that just makes no sense to me at all. No.”
‘We’re apolitical’
Asked about INEOS donating to Labour, Sir Jim replied: “We’re apolitical, INEOS.
“We just want a successful manufacturing sector in the UK and we’ve talked to the government about that. It’s pretty clear about our views.”
Sir Jim was keener to talk about the economy and politics than his role at struggling Manchester United, which he bought a 27.7% stake in from the American Glazer family in February – giving him an even higher business profile.
Old Trafford stadium in Manchester. Pic: AP
Push for stadium of the North
He is continuing to push for public funds to regenerate Old Trafford and the surrounding areas despite no apparent political support being forthcoming. Sir Keir was hosted at the stadium for a Premier League match last weekend just as heavy rain exposed the fragility of the ageing venue.
“There’s a very good case, in my view, for having a stadium of the North, which would serve the northern part of the country in that arena of football,” Sir Jim said. “If you look at the number of Champions League the North West has won, it’s 10. London has won two.
“And yet everybody from the North has to get down to London to watch a big football match. And there should be one [a large stadium] in the North, in my view.
“But it’s also important for the southern side of Manchester, you know, to regenerate.
“It’s the sort of second capital of the country where the Industrial Revolution began.
“But if you have a regeneration project, you need a nucleus or a regeneration project and having that world-class stadium there, I think would provide the impetus to regenerate that region.”
Marks & Spencer’s website and app has not been working for several hours, with a message telling shoppers “you can’t shop with us right now”.
“We’re working hard to be back online as soon as possible,” it adds.
All the menus and images have disappeared apart from one showing a model in a green jacket.
Customers trying to use the app got the message: “Sorry you can’t shop through the app right now. We’re busy making some planned changes, but will be back soon.”
The site is understood to have been down for several hours.
Replying to one customer on X, the retailer said: “We’re experiencing some technical issues but we are working on it.”
M&S is the latest high street name to have technical issues – last month some Sainsbury’s shoppers had problems with their online orders.
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The outage comes a few days before M&S is expected to reveal a big jump in annual profits.
It’s been a successful year for the brand, with strong sales across the business following a turnaround plan that has included store closures and cost cutting.
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