Chancellor Rachel Reeves‘s Budget has sparked recession fears as economists warn they are “worried” about the future of the British economy.
In last month’s Budget, Ms Reeves hiked taxes by £40billion in an attempt to stabilise the economy.
But figures from the Purchasing Managers’ Index – a survey-based economic indicator that provides a snapshot of the health of a country’s manufacturing, services and construction sectors – show that the UK economy is stagnating as private companies reel in their investments.
Paul Dales, chief UK economist at Capital Economics, told the Telegraph there there is now a real risk of recession.
He said: “Our forecasts assume that economic growth improves a bit in Q4 and strengthens further next year, partly due to the rises in government spending announced in the Budget.
“But I am now more worried that economic growth will be weaker than our forecasts. And at this stage, it would no longer be a surprise if the economy contracted in Q4.
“Any recession, though, would presumably be short and small as the drag on the economy from higher interest rates should now be fading.”
Chris Williamson, chief business economist at S&P Global Market Intelligence, added: “Companies are giving a clear ‘thumbs down’ to the policies announced in the Budget, especially the planned increase in employers’ National Insurance contributions.”
Rob Wood, chief UK economist at Pantheon Macroeconomics, also warned: “UK growth certainly slowed over the summer and we have had a couple of disappointing months. We were close to stalling in October.
“There’s any number of risks. We think growth will improve from here but growth could be worse than that.”
Ms Reeves was also dealt a blow last week when it was announced that the economy grew by just 0.1% between July and September. Experts had predicted growth of 0.2%.
Reacting to this, Ms Reeves said: “Am I satisfied with the numbers published today? Of course not. I want growth to be stronger, to come sooner, and also to be felt by families right across the country.
“It’s why in my Mansion House speech last night, I announced some of the biggest reforms of our pension system in a generation to unlock long-term patient capital, up to £80billion to help invest in small businesses and scale up businesses and in the infrastructure needs.”