The UK economy is heading “for the worst of all worlds” as GDP showed no growth in the third quarter of 2023, according to official figures.
The stagnation comes as business groups warn that activity is set to fall at the start of the new year.
The Office for National Statistics said that UK gross domestic product (GDP) showed no growth between July and September, in the run up to the Autumn Budget. Statisticians had previously estimated 0.1 per cent growth for the quarter.
The Confederation of British Industry (CBI) has issued a stark warning that the UK economy is “headed for the worst of all worlds” with activity set for a “steep” decline in the coming quarter.
The business organisation has pointed to Chancellor Rachel Reeves‘s recent Budget as a key factor, with growth expectations now falling to their lowest level in more than two years.
Private sector firms are bracing for a challenging start to 2025, with plans to reduce output, cut back on hiring, and increase prices.
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Hiring intentions have fallen to their lowest level since October 2020, during the Covid pandemic
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Alpesh Paleja, the CBI’s interim deputy chief economist said: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.”
The impact on employment is particularly severe, with the CBI survey of 899 firms showing that private sector employment “will be cut sharply” in the first quarter of 2025.
Andrew Griffith, conservative business spokesman accused Reeves of creating “a hostile climate for aspiration, for investment, and for growth”.
He said: “The Chancellor’s tax-raising spree and trash-talking her economic inheritance is literally killing businesses and jobs.
“If there is a recession – and based on these CBI expectations that seems increasingly likely – it will be one made in Downing Street. Labour need to urgently change course before the damage they are doing becomes even greater.”
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Hiring intentions have fallen to their lowest level since October 2020, during the Covid pandemic.
Nearly half of firms (48 per cent) are planning to reduce staff numbers, whilst 62 per cent have scaled back their pre-Budget hiring plans.
The British Retail Consortium has reported that consumer confidence about the economy has “nosedived” since the Budget.
Helen Dickinson, the consortium’s chief executive, warned that retailers face difficult choices as sales struggle to keep pace with rising costs.
She said retailers “will have no choice but to raise prices or cut costs – closing stores and freezing recruitment.”
The employers’ organisation said the outlook for the start of 2025 was “firmly negative” across all main sectors, including manufacturing, services and retail.
The Treasury has defended October’s budget, stating that “more than half of employers will either see a cut or no change in their National Insurance bills.”
Retailers “will have no choice but to raise prices or cut costs, hiring boss warns
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A Treasury spokesperson emphasised the government’s business support measures, including corporation tax being capped at the lowest rate in the G7.
They also highlighted plans for pension mega funds to boost investment in British businesses and infrastructure.
The Government pointed to its creation of a National Wealth Fund, intended to “catalyse over £70bn in investment to drive growth.”