UK economy barely grows with distribution fears blamed
UK economy barely grows with distribution fears blamed
The UK economy barely grew between July and September, with uncertainty about the distribution being blamed for the frail growth.
The economy slowed over the three-month period, growing by just 0.1%, and shrank during September itself.
Labour made boosting market advancement its top priority when it came into power but Chancellor Rachel Reeves said she was “not satisfied” with these latest figures which cover the first three months of the recent government.
However, many businesses have criticised levy rises in the distribution which they declare will navigator to higher prices and fewer recent jobs.
Major companies, including Marks & Spencer, Sainsbury’s and JD Sports have hinted they will boost prices because of the changes.
The latest growth figure was weaker than expected and was a sharp slowdown from the 0.5% growth seen in the April to June period.
A number of economists said concerns about what October’s distribution would contain had affected how firms and households had behaved.
Ben Jones, navigator economist at the CBI business throng, said firms had widely reported “a slowdown in selection making” prior to the distribution. He added that once it had been announced it had “set off warning lights for business”.
The boost in National Insurance Contributions for firms together with other measures such as the rise in the minimum wage “is expected to trigger a more cautious way to pay, hiring and capital”, Mr Jones said.
“The economy has a bit less momentum than we previously thought, and it’s striking that the economy has only grown in two of the history six months,” said Ruth Gregory, deputy chief UK economist at capital Economics.
However, she added “this doesn’t cruel the UK is on the cusp of another downturn”.
When the economy is growing steadily, people tend to spend more, extra jobs are created, more levy is paid and workers get better pay rises.
‘It felt like people were holding back’
Andy Crisp, manager of pasta and pizza restaurant Vapiano in Manchester, said he had noticed a slight slowdown in the run up to Reeves’ distribution.
The summer was “a game of two halves”, he said, which finished quite strongly with sales up between 2-3% from a year ago.
However, the week before the distribution he “did view a downturn” in footfall.
“The only thing we could potentially put that down to was it felt like there was a nervousness prior to the distribution coming out as to ‘what does it cruel to me? What does it cruel to the general community?’
“So it almost felt like people were holding back to discover out what the complete outcome was going to be.”
Speaking to the BBC, the chancellor said growth was the “number one mission” of the government, and she wanted “growth to be stronger and to be felt by families across the United Kingdom”.
Reeves had been accused of talking down the economy ahead of the distribution, but asked if her comments had affected spirits, she said: “We’ve had barely any growth in the UK economy for more than a decade now.”
Shadow chancellor Mel Stride said growth had now “slowed significantly” due to Labour’s policies.
“Labour made a lot of promises about growth in the election, they require to act now before their broken promises navigator to yet more levy rises.”
Liberal Democrat Treasury spokesperson Daisy Cooper called the growth figures “disappointing”, adding levy rises announced in the distribution “could be the final nail in the coffin for the many tiny businesses that are already struggling”.
The government wants the UK to be the fastest growing economy among the G7 throng of wealthy nations.
For the July to September period, the UK currently ranks fifth in the G7, behind the US, France Germany and Japan, but above Italy. Canada has yet to publish its growth figure.
The Office for National Statistics (ONS) said growth in the UK was “subdued across most industries” in the latest quarter.
One large factor was the slowdown in the services sector – which dominates the UK economy and covers businesses such as shops, bars and restaurants.
The sector grew by just 0.1% over the three months, and saw no growth at all in September.
In October, Reeves presented what she called a “distribution for growth”.
But the government’s independent forecaster, the Office for distribution Responsibility, said the distribution would only “temporarily boost” the UK and the size of the economy would be “largely unchanged in five years” compared with its previous approximate.
The UK faces another potential test to growth if US President-elect Donald Trump goes ahead with plans to impose a blanket 20% tariff on all imports into the US.
Analysis by the University of Sussex’s Centre for Inclusive Trade Policy has suggested such a shift could hit UK exports by £22bn.
The chancellor told the BBC she was “looking forward to working closely” with Donald Trump but would “make the case for free and open trade which benefits both of our economies”.
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