Isaac Stell, an investment manager at Wealth Club, warned: “A reversal in the fortunes for the manufacturing and construction sectors is a blow to the new Labour Government that has growth as a central pillar of its agenda.”
Some economists cautioned against reading too much into the figures, which can fluctuate significantly. However, others highlighted how the Government risks killing momentum by failing to portray a sense of hope.
Rob Morgan, chief investment analyst at Charles Stanley, said: “With the Government speaking in a very cautious tone about the economy and warning of ‘difficult decisions’ around tax and spending, it is harder for businesses to retain confidence about the environment going forward.”
It comes after several warnings from Reeves and Sir Keir Starmer that public finances are far worse than they thought when taking office, paving the way for tax rises.
In July Ms Reeves said there was a shortfall of £22bn in the public finances for this financial year alone, despite a sizeable chunk of that stemming from generous public sector pay deals that she signed off. Such rhetoric has only intensified as she approaches her maiden Budget at the end of October.
Sir Keir has spoken of things getting worse before they get better, adding that the “broadest shoulders” should bear the heaviest burden.
If they are not careful then such language could prolong the UK’s economic struggles, claims Lindsay James, investment strategist at Quilter Investor.
She said: “Given the mood music emanating from the Government and the economic inheritance it has received from the Conservatives, it needs to be careful not to overcorrect with its narrative around tax rises and the potential this has to put off investment.”
She added: “Tax rises have been flagged ahead of the autumn Budget, and consumers and businesses may feel rather more cautious heading into the winter months as they await details from the Treasury.”