UK economy disappoints despite recovery in growth

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The UK economy returned to growth for the first time in three months, but growth was slower than expected.

The 0.1% increase in November was led by trade in the pubs, restaurants and construction industries, after declines in October and September.

The figures come after recent turmoil in financial markets saw Britain's borrowing costs reach their highest level in years and the value of the pound fall.

But with tax rises coming into effect from April, the weak figures have heightened concerns that Britain's growth stall could persist for some time.

Prime Minister Rachel Reeves, under pressure after market turmoil threatened her economic plans, admitted the government “must do more to grow our economy” and called for growth “even faster” to boost growth. He reiterated his promise to improve. standard of living.

Prime Minister Keir Starmer added that economic growth “will always take time” but said the recovery in growth in November was “a step in the right direction”.

November's economic figures are the first since Reeves' first Budget, when she announced $40 billion worth of tax increases, including higher national insurance premiums and lower limits for employers.

Ahead of April's tax hikes, companies have repeatedly warned that additional costs, including higher minimum wages and reduced business tax rates, could impact their ability to grow the economy, and employers are anticipating cash shortages to fund wage increases. And create new jobs.

The Office for National Statistics (ONS) said it estimated the economy showed no growth in the three months to November. In the five months since Labor came to power, this figure has only doubled.

AJ Bell head of financial analysis Danni Hewson said the wider economic picture was one where “the economy is still in trouble”, while Ben Jones, chief economist at the CBI Business Group, which claims to represent 170,000 businesses. (Ben Jones) “The mood seems to be cautious towards British companies.”

“We’ve had a pretty gloomy start to the year,” said Liz Martins, chief economist at HSBC. “We’re not in a recession, but we’re not growing much either.”

To change that, Reeves will later meet with representatives of the country's biggest regulators, including energy watchdog Ofgem and the Competition and Markets Authority, to get their ideas for growing the economy.

Reeves is understood to have decided to meet in person rather than wait to read submissions, with a Treasury source describing the meeting as a “back-stabbing affair”.

The ONS said the construction and services sectors led the small growth in November.

Construction was driven by new commercial development, but ONS director of economic statistics Liz McKeown said production continued to decline across several manufacturing industries and oil and gas extraction companies.

She added: “There was some growth in services, with wholesale, pubs, restaurants and IT businesses all performing well, but this was partly offset by declines in accounting, business leasing and leasing.”

The ONS publishes economic figures every month. However, quarterly figures covering three months at a time are considered more important.

The pound fell after the data was released and was traded at $1.221, down 0.2% on the day. Long-term government borrowing costs have remained stable.

‘Put on the handbrake’

Adrian Haller, who runs the UK branch of Bruderer, a Swiss manufacturer of high-speed presses, is preparing to open a new factory in Telford, Shropshire, after 10 years of planning.

But he said the Budget had “put a damper” on the business, with some of his biggest clients becoming more cautious after the increase in employers' National Insurance contributions was announced.

“As a result, they have reduced their interest in ordering from companies like us,” he added.

“I think everyone put the handbrake on.” he said “What I hope is that the government will listen to what we are trying to say and the fact that they have made too many changes too quickly and it is making it difficult for us to survive.”

A growing economy usually means people spend more, additional jobs are created, more taxes are paid, and workers receive better wage increases.

When the economy contracts, companies may reduce investment and jobs.

Rob Wood, chief UK economist at Pantheon Macroeconomics, said the 'global uncertainty' surrounding the tax rises announced in the Prime Minister's October Budget and Donald Trump's potential tariffs on trade with the US ‘It dragged the economy into recession,’ he said.

The weaker-than-expected growth figures have fueled expectations that the Bank of England will cut interest rates to 4.5% from 4.75% at its next meeting in February, especially after UK inflation unexpectedly fell in December.

But Mr Wood said the 2025 outlook was brighter than the 2024 figures.

He said that despite the April tax hike on businesses, Reeves would boost the economy in 2025 by “recycling increased taxes into more spending.”

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