The UK’s economy has slid into stagnation as official figures show the economy flatlined in the third quarter of the year.
Gross domestic product (GDP) rose by 0.2%, showing no change from August’s figures, according to the National for National Statistics (ONS). GDP measures the value of goods and services produced by the economy.
Despite the weak figures, the UK economy managed to avoid a recession this year, which is defined as two consecutive quarters of negative GDP. Economists had predicted that the economy would shrink by 0.1%.
Read more: Interest rates: No more rises needed to tackle inflation, says BoE chief economist
Overall, the impact of high interest rates and inflation weighed on consumers and businesses. The services sector shrank slightly, while construction expanded slightly.
The Bank of England last week left interest rates unchanged at 5.25% for a second consecutive time, amid signs the economy is weakening. It had previously raised interest rates 14 times since the end of 2021.
ONS director of economic statistics Darren Morgan said: “The economy is estimated to have shown no growth in the third quarter. Services dropped a little with falls in health, management consultancy and commercial property rentals. These were partially offset by growth in engineering, car sales and machinery leasing.
“There were also small growths in manufacturing, led by cars and metal products, while construction grew due to new commercial property work.
“In the month of September the economy grew slightly, with increases in film production, health and education. This growth was partially offset by falls in retail and computer programming.”
Trade in goods and services deficit narrowed by £7.1bn to £6bn between July to September, figures show.
Read more: Inflation: What is it and what does it mean for you?
Chancellor Jeremy Hunt blamed high inflation for the UK’s lacklustre economic performance.
“High inflation is the single greatest barrier to economic growth.The best way to sustainably grow our economy right now is stick to our plan and knock inflation on its head,” Hunt said.
“The Autumn Statement will focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs.”
Gross domestic product actually declined by 0.02% or £173m, but for the purposes of national statistics it is rounded to 0% growth.
FYI, rounding came to the rescue in Q3: UK #GDP actually fell by 0.03% on the quarter, but that’s flat to one decimal place!
— Julian Jessop (@julianHjessop) November 10, 2023
Paul Dales, chief UK economist at Capital Economics said the “key point is that the economy is not weak enough to reduce core inflation and wage growth quickly”.
As a result, he does not expect the Bank of England will be able to cut interest rates until late in 2024, rather than in mid-2024 as widely expected.
Watch: ‘Much too early’ to cut borrowing costs, Bank says after holding rates at 5.25%
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