The UK economy grew by just 0.1% in November, weaker than expected but easing some pressure on the chancellor after it contracted in the previous month.
Rachel Reeves acknowledged it would take time to revive the UK economy, responding to the lacklustre figure by saying she was “determined to go further and faster” to kickstart growth.
City economists had forecast that GDP would rise by 0.2% in November, and the weaker than expected growth raised the likelihood that the Bank of England will cut interest rates next month.
UK government borrowing costs dipped after the growth data was released, which will increase the chances that Reeves does not breach her fiscal rules. Bond yields dropped at the fastest rate since 2023 on Wednesday after UK inflation eased in another fillip for the chancellor.
The Office for National Statistics (ONS) said the economy showed no growth in the three months to the end of November, because GDP fell by 0.1% in September and October.
Simon Pittaway, a senior economist at the Resolution Foundation, said the GDP data was disappointing, raising fears of stagnation, despite a welcome return to growth. “In recent years the UK has been a growth rollercoaster, with a recession in late 2023 followed by a bounce back in early 2024,” he said.
“But its longer-term record is one of economic stagnation, and that is where Britain risks returning to. The paltry GDP growth late last year reinforces the need for the government’s economic plans to start bearing fruit.”
Reeves blamed “14 years of economic stagnation” for the economic situation, and said she was determined to “kickstart growth, which is the number one priority in our plan for change”.
After a meeting in Downing Street with the chief executives of watchdogs including the Competition and Markets Authority, Ofcom, Ofwat and Ofgem, the chancellor said many promising ideas to promote growth were discussed.
She said 17 regulators would be called in to have their proposals scrutinised over the next few weeks “as the government leaves no stone unturned to deliver growth”. Each regulator will need to bring forward five proposals.
Alongside the business secretary, Jonathan Reynolds, Reeves said: “Every regulator, no matter what sector, has a part to play by tearing down the regulatory barriers that hold back growth. I want to see this mission woven into the very fabric of our regulators through a cultural shift from excessively focusing on risk to helping drive growth.”
Fears remain that the UK economy is on course to stall overall in the final three months of 2024, after zero growth in the three months to the end of September.
The Bank of England has pencilled in no growth for the fourth quarter, leading to worries that the UK could undergo a long period of stagnation combined with relatively high inflation, although growth in prices unexpectedly fell from 2.6% to 2.5% in December.
The shadow business secretary, Andrew Griffith, said Reeves was “begging regulators for growth ideas” and the policy “smacked of desperation”. “She is out of ideas and out of her depth,” he said.
The shadow chancellor, Mel Stride, said Labour had inherited the fastest growing economy in the G7, and that it was Reeves who was “killing investment and jobs”.
“This is the third month in a row of disappointing growth figures,” he said. “The chancellor seems content with burying her head in the sand and blaming the previous government, but this is a crisis made in Downing Street. We need an urgent change of course.”
Keir Starmer said the government would be unrelenting in its pursuit of economic growth. “It was always going to take time to turn around 14 years of economic failure under the last government. That was always going to take time,” the prime minister said during a trip to Ukraine.
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“The figures out today are a step in the right direction, but there’s much, much more we’ve got to do and that we will do. We’re going to be unrelenting when it comes to driving our economy forward – changing the planning rules, changing regulation.”
The yield on UK 10-year gilts, which reflects the cost of government borrowing, dipped by 0.04 percentage points on Thursday to 4.67%, further from the 16-year highs set earlier this month.
Thirty-year gilt yields eased by 0.05 percentage points, to 5.23%, having hit their highest level since 1998 last week.
Food sales at supermarkets picked up in November, helping to lift the services sector. Pubs and restaurants also enjoyed a mini boom. But the rises were offset by a fall in industrial production. Manufacturing, which has suffered amid a downturn in the car industry and from Brexit, contracted by 1% over the quarter, while the services sector was flat.
The economics director at the Institute of Chartered Accountants in England and Wales, Suren Thiru, said the “disappointingly modest return to growth” was unlikely to ease concerns that low growth married to relatively high inflation would persist.
He said that despite the chancellor’s plans to boost economic growth, her budget in October had caused dramatic damage to confidence. Global uncertainty was also very likely to have suppressed activity in December. “Though these disappointing figures make a February interest rate cut more probable, concerns over financial market fragility and heightened global inflation risks mean a policy loosening next month is not quite done and dusted,” he said.
The money markets now indicate there is an 83% chance that the Bank of England cuts interest rates at its next meeting on 6 February.
The pound dipped by a third of a cent against the US dollar on Thursday to $1.22.
Reynolds said he was worried about a potential tariff war after Donald Trump’s return to the White House. “It’s going to be a challenging time for anyone who is responsible for trade in a big economy because of some of those pledges that were made in the campaign,” he told Sky News.
Asked if he was worried about a tariff war, he said: “I am. I am, because the UK is a very globally orientated economy, so the exposure, the danger to the UK, is actually greater than even some comparable countries around that.
“So, a lot of our work has been preparing for that, engaging early with the new administration.”
