Bank of England in the City of London on November 6, 2024 in London, United Kingdom. The City of London is a city, ceremonial borough and local government district containing the primary central business district of London, the CBD. The City of London is often referred to simply because the City is also colloquially known as the Square Mile. (photo by Mike Kemp/in pictures via Getty Images)
Mike Kemp | In pictures | Getty Images
The British economy failed to post any growth in the three months to September, revised figures from the British Office for National Statistics showed on Monday.
AND preliminary assessment for the third quarter, published by the ONS last month, says UK GDP rose by 0.1% in the period. However, the final data released on Monday showed GDP growth of 0% compared to the previous quarter.
The British pound it was slightly lower against the US dollar on Monday, trading around $1.2566 by 8:37 a.m. London time.
Monday’s figures deal another economic blow to Britain, after a series of weak data prints dampened sentiment and raised questions about the newly elected Labor government’s fiscal strategy.
Earlier this monthfigures from the ONS show that the UK economy unexpectedly shrank by 0.1% in October. It was the second consecutive monthly GDP decline for the country, following a 0.1 percent drop in September.
Looking ahead, Paul Dales, chief UK economist at Capital Economics, said he expected the UK economy to also stagnate in the final quarter of 2024 – but his view was not entirely pessimistic.
“Overall, these data suggest that after the remarkable growth in the first half of the year, the economy stalled in the second half of the year due to a combination of lingering pressure from higher interest rates, weaker foreign demand and some policy concerns in the budget,” he said in a note on Monday.
“Our hunch is that 2025 will be a better year for the economy than 2024. But recent data shows that the economy is not gaining much momentum as the year draws to a close.”
Meanwhile, inflation looks set to rise again. ONS said last week that UK inflation rose to 2.6% in November, marking the second consecutive month of rising prices.
The Bank of England then kept its key interest rate on hold stable 4.75%. While markets had expected no rate change at Thursday’s Monetary Policy Committee (MPC) meeting – it was a surprise that three MPC members voted to cut rates (a Reuters poll had predicted only one member would vote to cut) .
While Governor Andrew Bailey has previously signaled four rate cuts could be possible next year, traders are divided over when the Bank of England will continue to cut interest rates. LSEG data shows markets expect another hold at the MPC meeting in February, with a slim majority of traders expecting a 25 basis point rate cut in March.
He comes after British Chancellor of the Exchequer Rachel Reeves at the end of October presented the first Labor government budget since replacing the long-serving Conservative government in July.
The budget included plans by Prime Minister Keir Starmer’s government to raise taxes by 40 billion pounds ($50.5 billion). Reeves said at the time that this would be achieved through a series of new policies, including an increase in National Insurance payments for employers — payroll tax — as well as an increase in capital gains tax and cancellation of winter fuel payment pensioners.
Some policies have met with a lot of criticism. It was prompted, for example, by an increase in National Insurance payroll tax warnings from companies that are less likely to hire new workers report from job site Indeed earlier this month suggesting that the policy has already hit job creation in Britain.
