UK Economic Growth Slows to 0.1% Amid Budget Concerns and Rising Interest Rates
UK Economic Growth Slows to 0.1% Amid Budget Jitters and High Interest Rates
Source: The Guardian
Current Economic Situation
- The UK's economy experienced minimal growth of 0.1% in the third quarter of 2024, a drop from 0.5% in the previous quarter.
- This slowdown is largely attributed to uncertainty surrounding Labour’s first budget and high interest rates, which adversely impacted business and consumer spending.
International Comparison
- The UK ranked sixth in G7 growth during the third quarter, falling behind the US, Germany, and France.
- US economic growth stood at 0.7% during the same period.
Sector Performance
- Service and manufacturing sectors showed a significant slowdown, highlighting the hesitancy in investment and decision-making.
- Manufacturing output dropped, compounded by less work in the IT sector, despite a rise in car sales.
Business Investment and Trade
- Business investment rose by 4.5% compared to the previous year, but this was overshadowed by a decline in exports.
- The trade balance worsened with three consecutive falls in exports, although this was mitigated by a decrease in imports.
Political Responses
- Chancellor Rachel Reeves expressed dissatisfaction with the growth figures, emphasizing her commitment to driving economic improvement.
- Critics, including Shadow Chancellor Mel Stride, argue that the government’s measures are raising costs and stifling growth.
Outlook Going Forward
- Economists predict that unless changes are made, the economy may continue to stagnate, as consumer confidence remains low.
- The Bank of England has cut interest rates twice this year, but the likelihood of further cuts remains limited due to existing high borrowing costs.