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Highlights:
- Revised GDP Figures Show No Growth: The UK economy recorded zero growth in Q3 2024, revising earlier estimates of a 0.1% rise.
- Concerns of Recession Deepen: October's contraction and pessimistic forecasts heighten fears of back-to-back negative quarters.
- Private Sector Pessimism Escalates: CBI survey reveals declining activity expectations and increased concerns over policy impacts.
Revised figures from the Office for National Statistics (ONS) indicate that the UK economy stalled in the third quarter of 2024, with gross domestic product (GDP) showing no growth. This contrasts with an earlier estimate suggesting a modest 0.1% increase, further intensifying concerns about the country’s economic trajectory.
Contraction Raises Recession Fears
The updated data comes on the heels of figures showing an unexpected contraction in October, raising the likelihood of a recession. Economists define a recession as two consecutive quarters of negative growth, and the current trend has sparked concerns about the economy's resilience.
Adding to the unease, a survey from the Confederation of British Industry (CBI) revealed that private sector businesses expect activity to decline over the next three months. The pessimistic outlook was recorded across all sub-sectors, with firms bracing for reduced output and slower hiring.
CBI Deputy Chief Economist Alpesh Paleja stated, “The economy is headed for the worst of all worlds. Firms expect to reduce both output and hiring, and price growth expectations are getting firmer.”
Impact of Policy Measures
The survey pointed to growing concerns over measures introduced in the recent Budget, particularly the rise in employer national insurance contributions, which businesses have highlighted as exacerbating weak demand.
These challenges come amid an already fragile economic environment, where uncertainty over future growth prospects weighs heavily on business and consumer sentiment.
Bright Spots in the Data
Despite the overall bleak outlook, some analysts found reasons for cautious optimism. Pantheon Macro highlighted areas of strength in Monday’s data, including growth in investment and resilient consumer spending.
Pantheon noted, “Looking ahead, GDP growth is projected to rebound slightly in the fourth quarter, with quarterly growth averaging a modest 0.4% in 2025.”
Challenges Ahead
While certain sectors exhibit resilience, the broader economic landscape remains fraught with challenges. High inflation, rising costs for businesses, and slowing global demand continue to weigh on growth prospects.
The next few months will be critical as policymakers and businesses navigate a precarious economic environment. With the potential for further contractions, discussions around stimulus measures and structural reforms are likely to intensify as the government seeks to prevent a prolonged downturn.
