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Bank of England in the City of London on November 6, 2024 in London, United Kingdom. The City of London is a city, ceremonial county and local government district containing the main central business district of London, the CBD. The City of London is widely known simply as the City is also colloquially known as the Square Mile. (photo by Mike Kemp/In Pictures via Getty Images)
Mike Kemp | In Images | Getty Images
Britain’s economy posted no growth in the three months to September, revised figures from the UK’s Office for National Statistics showed on Monday.
A preliminary estimate for the third quarter, published by the ONS last month, said UK GDP grew by 0.1% over the period. However, final data released on Monday showed GDP growth of 0% from the previous quarter.
The British pound was slightly lower against the US dollar on Monday, trading around $1.2566 at 8:37 a.m. London time.
Monday’s figures deal another economic blow to Britain, after a series of weak data prints dampened sentiment and raised questions about the newly elected Labor government’s fiscal strategy.
Earlier this monthdata from the ONS showed that the UK economy unexpectedly contracted by 0.1% in October. It was the second monthly drop in the country’s GDP, after a 0.1% drop in September.
Looking ahead, Paul Dales, chief UK economist at Capital Economics, said he expected the UK economy to have also stagnated in the last quarter of 2024, but his view was not entirely pessimistic.
“Overall, these data suggest that after a strong first half of the year, the economy stalled in the second half of the year due to a combination of the persistent drag on interest rates plus highs, weaker overseas demand and some policy concerns in the budget,” he said in a note on Monday.
“Our hunch is that 2025 will be a better year for the economy than 2024. But more recent data suggests that the economy doesn’t have much momentum as the year winds down.”
Inflation, meanwhile, looks set to rise again. said the ONS last week that UK inflation had risen to 2.6% in November, marking the second consecutive month of rising prices.
Subsequently, the Bank of England kept its base interest rate stable at 4.75%. While markets expected no rate change at Thursday’s Monetary Policy Committee (MPC) meeting, it came as a surprise that three MPC members voted to cut rates (a Reuters poll had forecast that only one would vote to cut).
While Governor Andrew Bailey has previously signaled Four rate cuts could be possible next year, traders are divided on when the Bank of England will resume cutting interest rates. LSEG data shows markets expect another hold at the MPC meeting in February, with a small majority of traders expecting rates to be cut by 25 basis points in March.
He comes after UK Finance Minister Rachel Reeves at the end of October presented the Labor government’s first budget since replacing the former Conservative government in July.
The budget included plans by Prime Minister Keir Starmer’s government to raise taxes by 40 billion pounds ($50.5 billion). Reeves said at the time that this would be achieved through a series of new policies, including an increase in employer’s national insurance payments (a tax on earnings) as well as an increase in capital gains tax and the Waiver of winter fuel payments to pensioners
Some of the policies have received widespread criticism. The rise in National Insurance payroll tax, for example, has led to notices of companies with which they will be less likely to hire new workers a report of the recruitment site Indeed, earlier this month, he suggested that politics had already reached British vacancies.
