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United Kingdom: Growth Disappointing

The UK economy experienced a challenging third quarter, marked by feeble growth. Despite better governance under Labour, its recovery will not be easy.

By EC Invest

In the United Kingdom, growth was low in the third quarter. Over a year, the expansion was only 1.0% compared to the previous quarter, it was 0.1%. This figure, the first Labour sub-government in power, is hardly reassuring. The services sector, which had been driving the economy in the Spring, has collapsed.

A rebound will not be noticeable. While it is clear that the Bank of England will take advantage of inflation, which fell to 1.7% in September, to resume policy rate cuts, it remains cautious for now. After lowering its primary key interest rate to 4.75% on 7 November, it reports that a further decline is not expected before early 2025.

ECI UK Growth Disappoints GRAPHIC 920x320

At the same time, the new government has raised the tax burden, trying to reconcile investment in upgrading the public sector (including the NHS, the British health system) with limited budget deficits—a balance that is not self-evident. The rise in social security costs borne by businesses is likely to affect employment, the purchasing power of British people, and, ultimately, the economy as a whole.

While the responsible approach to public finances and the desire to normalise relations with Europe and the rest of the world are good news and reflect a willingness to improve how UK is governed, the recovery of the British economy will not be accessible at this stage.

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