Why did the UK economy slow in the third quarter, and what does it mean?

Economic maturation slowed crossed the UK betwixt July and September, according to the astir caller authoritative figures.

Chancellor Rachel Reeves has said she is “not satisfied” with the numbers, which showed the system increasing by conscionable 0.1% successful the 4th pursuing Labour’s predetermination win.

But what does this really archer us, and what interaction volition it have? The PA quality bureau explains.

– What is gross home product?

Gross home product, oregon GDP, is the word typically utilized to picture the size of a nation’s economy.

It is the measurement of what is going connected financially crossed each companies, governments and households.

Economic maturation happens erstwhile households and firms are spending much wealth and creating much jobs, portion a contraction is erstwhile radical and firms are pulling backmost spending.

That is lone a tiny increase, and it comes aft the system grew 0.5% successful the erstwhile quarter, from April to June.

Things inactive look comparatively anemic compared to the archetypal fractional of 2024, erstwhile the system was bouncing backmost accelerated from a recession successful precocious 2023.

Liz McKeown, ONS manager of economical statistics, said immoderate sectors similar retail and operation performed well, but added: “Generally, maturation was subdued crossed astir industries successful the latest quarter.”

Several experts said the slowdown could person been down to companies holding backmost connected spending decisions until aft the Budget.

Ben Jones, pb economist astatine the Confederation of British Industry, said uncertainty successful the run-up to the autumn Budget “probably played a large part”, aft firms reported a slowdown successful making spending decisions.

The services sector, which includes things similar shops, leisure activities, concern firms and galore more, was level successful September, and grew by conscionable 0.1% during the three-month period.

Because it is specified a large portion of the economy, astir 80%, that was a cardinal operator of wide GDP.

The operation assemblage saw 0.8% growth, portion the smaller accumulation assemblage contracted by 0.2%.

We spot maturation picking up a interaction towards year-end. And we inactive spot affirmative momentum into 2025

Sanjay Raja, main UK economist astatine Deutsche Bank

– What does this mean for the Government?

Economic maturation slowing is usually seen arsenic a atrocious thing, and Chancellor Rachel Reeves said she was “not satisfied with these numbers”.

A fig of surveys showed companies held backmost connected spending successful the months earlier the October Budget, which Ms Reeves repeatedly warned would see “tough decisions”.

Shadow chancellor Mel Stride said it had been Labour’s “mission to speech down the UK economy”.

But it is uncertain however overmuch of the slowdown tin beryllium enactment down to the existent Government, which lone came into bureau astir a week into July.

Luke Bartholomew, lawman main economist astatine the concern elephantine Abrdn, said it is “also imaginable that this conscionable represents mean monthly volatility alternatively than thing much fundamental”.

– Will it impact Labour’s spending plans?

Probably not. Ms Reeves said connected Friday greeting that she wanted maturation to “be stronger, to travel sooner, and besides to beryllium felt by families close crossed the country”.

And the Budget, successful which Labour besides announced a £70 cardinal boost successful nationalist spending, came aft the play covered by these figures.

Sanjay Raja, main UK economist astatine Deutsche Bank, said “The roadworthy up remains bumpy.”

He warned that the taxation rises could deed concern spending further earlier Labour’s spending plans commencement having a affirmative interaction aboriginal adjacent year.

“We spot maturation picking up a interaction towards year-end. And we inactive spot affirmative momentum into 2025,” helium said.

– What astir the Bank of England?

The Bank of England’s policymakers volition beryllium keeping a adjacent oculus connected GDP figures to measure erstwhile they tin adjacent chopped the basal involvement rate.

This affects however costly it is to get money, and dictates things similar owe rates from precocious thoroughfare banks.

The Bank’s Monetary Policy Committee chopped involvement rates by a 4th constituent to 4.75% successful aboriginal November, with different rates determination coming successful December.

But Suren Thiru, economics manager astatine the Institute of Chartered Accountants successful England and Wales said that contempt the “downbeat” figures, different complaint chopped adjacent period looks “improbable”.

He said complaint setters volition “likely beryllium acrophobic capable implicit ostentation risks from the Budget and increasing planetary headwinds to defy signing disconnected back-to-back involvement complaint cuts.”