According to new figures, the UK economy has not grown between the months of July to September after a sequence of interest rate increases. Despite being slightly better than anticipated, many analysts had predicted the economy to shrink during this period. Some forecasters suggest that the UK’s economy may remain static for several months to come, with the Bank of England recently stating there may be zero growth until 2025, although avoiding a recession.
Interest rates have risen 14 times in a row to attempt to control rising prices, which this has impacted economic growth by increasing loan rates for consumers and companies. Bank Governor Andrew Bailey recently said that it was too soon to discuss any reductions to interest rates. The British government may be relieved that the risk of a formal technical recession (two quarters of contraction in the economy) has minimised, though Chancellor Jeremy Hunt reiterated that inflation was still the greatest obstacle to economic growth and that it was necessary to maintain the plan against inflation.
Despite the rate increases flattening growth, the Prime Minister Rishi Sunak’s professed aim to expand the UK economy is in jeopardy. The economy underwent a slight reduction from July to September, with the growth forecast for the final quarter of the year estimated to be around 0% to 0.1%. This matches other leading European countries, which are also contending with rising rates. The British government may note next week’s anticipated significant reduction in the headline rate of inflation as a victory even as its economic growth target becomes more questioned.
As inflation eases, the growth issue may become more prominent. The Gross Domestic Product (GDP) figures demonstrate the UK economy’s wellbeing – an attempt to quantify all the governments, organizations and people’s activities in a country. A rise in GDP equals increased economic activity and income growth for the people, on average, whereas a fall can be bad news for businesses. The 0% growth during the July-to-September quarter follows an expansion of 0.2% in the previous quarter. However, the ONS data showed a growth of 0.2% in September alone in comparison to the preceding month, which outperformed expectations. This was supported by growth in film production and services, such as accountants and engineers
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