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The UK economic system grew 0.1 per cent in November, undershooting analysts’ expectations, as chancellor Rachel Reeves comes underneath growing stress to rebuild confidence within the authorities’s fiscal plans.
The month-to-month determine was under the 0.2 per cent progress forecast by economists polled by Reuters and follows a 0.1 per cent contraction in each October and September, based on information revealed on Thursday by the Workplace for Nationwide Statistics.
November’s enlargement, the primary since August, was led by the dominant companies sector, which grew 0.1 per cent and offset a 0.3 per cent contraction in manufacturing. The development sector grew 0.4 per cent in November following a 0.3 per cent contraction in October.
Thursday’s information won’t dispel issues over the efficiency of the UK economic system after fears of stagflation — sluggish progress is accompanied by persistent worth pressures — contributed to a pointy rise in borrowing prices at first of the yr.
“This disappointingly modest return to growth for the UK economy is unlikely to ease stagflation concerns,” stated Suren Thiru, economics director at The Institute of Chartered Accountants in England and Wales. “November’s uptick is unlikely to have sparked a more notable improvement in economic activity across the fourth quarter.”
The GDP figures comply with official information launched on Wednesday exhibiting an sudden decline in inflation to 2.5 per cent in December from 2.6 per cent the earlier month.
Within the three months to November, the economic system registered no progress in contrast with the earlier three months. Output was additionally flat within the third quarter, which marked a pointy slowdown from the 0.4 per cent enlargement within the earlier quarter. Progress was 0.7 per cent between January and March final yr.
Specialists polled by the Monetary Occasions anticipated the UK economic system to outperform France and Germany, however warned that Reeves’ plans to extend employers’ nationwide insurance coverage contributions might harm the labour market. The chancellor introduced the rise in her October Funds however it’ll solely take impact in April.
Following the discharge of the info on Thursday, Reeves stated: “I am determined to go further and faster to kick-start economic growth, which is the number one priority in our Plan for Change.”
In December, the Financial institution of England stated it anticipated no progress within the closing three months of the yr, down from a 0.3 per cent enlargement it had forecast in November.
The BoE left rates of interest unchanged at 4.75 per cent final month after slicing borrowing prices twice in 2024. Markets largely anticipate that the financial institution will lower the coverage price by a quarter-point in February.
Sterling, which has fallen greater than 2 per cent in opposition to the greenback this yr, was little modified $1.221 following the discharge of the info.
UK authorities bonds held onto positive factors from a rally on Wednesday spaked by the inflation information. The ten-year yield was little modified at 4.73 per cent in early buying and selling.
Merchants in swaps markets continued to cost in a minimum of two quarter-point price cuts from the Financial institution of England this yr and an 80 per cent probability that the primary one comes subsequent month.
