UK Economic Output Stalls in Q3

LONDON (Reuters) – British economic output failed to grow in the third quarter, official figures showed, indicating a slowdown at the start of Prime Minister Keir Starmer's administration.

The Office for National Statistics (ONS) reported a change in gross domestic product (GDP) output of 0.0% for the July-to-September period, a reduction from a previous estimate of 0.1% growth.

Additionally, the ONS revised its estimate for growth in the second quarter down to 0.4% from 0.5%.

Starmer and Finance Minister Rachel Reeves, who took power in early July, warned of the economy's poor state before announcing tax increases for employers in the budget released on October 30.

Last week, the Bank of England predicted zero growth in the economy for the fourth quarter but maintained current borrowing costs due to ongoing inflation risks.

Reeves highlighted that the GDP data presents her with a significant challenge following “15 years of neglect” under previous Conservative-led governments, asserting that her budget targets sustainable long-term growth.

The ONS noted that there was no growth in the services sector during the third quarter. Although the construction sector saw a 0.7% increase, it was offset by a 0.4% decline in production.

Sectors such as bars, restaurants, legal firms, and advertising were identified as among the weakest during this period.

The data also revealed stagnation in living standards, with households tapping into their savings, although those savings remain high compared to historical levels.

Additionally, the ONS reported a decrease in Britain's current account deficit to 18.1 billion pounds in the third quarter, down from 24 billion pounds in the April-to-June period. A Reuters poll of economists had anticipated a shortfall of 22.5 billion pounds.

Following the ONS data release, the value of the pound remained relatively stable.