The prospect of swift economic recovery remains elusive, Sir Keir Starmer warned on Monday, as official figures confirmed the UK economy stagnated in the third quarter.
Downing Street stopped short of denying the possibility of further tax rises, fuelling concerns among businesses that the government’s package of fiscal measures might not be enough to steady the ship.
Data from the Office for National Statistics (ONS) showed gross domestic product (GDP) flatlined at 0.0% between July and September, down from an initial estimate of 0.1% growth. The revision raises the spectre of recession, particularly after the ONS downgraded second-quarter growth to 0.4% from 0.5%. The legal and advertising sectors, along with pubs and restaurants, were cited as the main drags on output.
Paul Dales, chief UK economist at Capital Economics, noted that despite a strong first half of the year, momentum has dissipated. “The economy ground to a halt in the second half of the year due to lingering higher interest rates, weaker overseas demand and concerns over the budget,” he said. Dales expects 2025 to be “a better year” but warns that the economy is losing steam in the final months of 2024.
With Paul Johnson, director of the Institute for Fiscal Studies, cautioning that Labour’s Chancellor, Rachel Reeves, may have to “come back for more money” from the public, the government has been reluctant to rule out further tax hikes. When pressed, Starmer’s spokesman highlighted Reeves’s statement that her October budget was “once-in-a-parliament” and had “wiped the slate clean” by addressing a £22 billion fiscal shortfall. Yet he admitted the possibility remains that additional tax rises could be necessary.
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.
