The UK is still escaping recession but its economy is stagnating. In the third quarter, GDP stagnated compared to the previous three months. This could foreshadow the beginning of a contraction that has been predicted for months, but has not materialized. The performance is comparable to that of the euro area, which recorded a slight decline in GDP of 0.1% in the third quarter, dragged down by Germany.
UK household consumption fell by 0.4% over the period, while business investment plunged by 4.2%. This reflects the growing burden on the economy of the cost of credit, which has been burdened by interest rates raised to 5.25% by the Bank of England since August. "The poor third-quarter results reflect the pressure on household purchasing power in recent years," said Andrew Goodwin of Oxford Economics.
We doubt that growth will pick up significantly before the end of next year, leaving the spectre of recession hanging over the UK economy for some time to come
Thomas Pugh, Economist at RSM UK
The British economy was saved over the period by the contribution of foreign trade.
Chancellor of the Exchequer Jeremy Hunt will present an amending budget on 22 November, which will "focus on how we can restore healthy economic growth by unleashing investment, putting people back to work and reforming our public services to deliver the growth our country needs". Restarting growth was one of Prime Minister Rishi Sunak's five commitments for this year. The ruling Conservatives are trailing the opposition Labour Party in the polls for the next election, expected by the end of 2024. However, the situation is not expected to improve much between now and then. "We doubt that growth will pick up significantly before the end of next year, leaving the spectre of recession hanging over the UK economy for some time to come," said Thomas Pugh, economist at RSM UK. The IMF forecasts 0.5% growth for the UK this year, and 0.6% next year.