The UK economy recorded zero growth in the third quarter of 2024, according to revised figures released by the Office for National Statistics (ONS) on Monday. The updated data reflects a sluggish start to Prime Minister Keir Starmer’s tenure and highlights broader economic challenges amid stagnant output and declining business confidence.
The ONS revised its estimate for gross domestic product (GDP) growth from July to September to 0.0%, down from an earlier projection of 0.1%. It also downgraded second-quarter growth figures from 0.5% to 0.4%, underscoring the slowing pace of economic activity.
Economic Challenges Emerge
Prime Minister Starmer and Finance Minister Rachel Reeves assumed office in July, emphasizing the precarious state of the economy. Their October budget, which introduced business tax hikes, has sparked concerns among employers and analysts.
Last week, the Bank of England predicted stagnation in the fourth quarter, citing persistent inflation risks. While the central bank held interest rates steady, analysts speculate that rate cuts could occur as early as 2025 if economic conditions worsen.
Paul Dales, chief UK economist at Capital Economics, attributed the third-quarter slowdown to weaker export demand despite steady domestic consumer spending and business investment. “Our hunch is that 2025 will be a better year for the economy than 2024,” Dales said.
Warning Signs for 2025
A survey by Lloyds Bank revealed that business confidence hit its lowest point of the year in December, while data from the Confederation of British Industry (CBI) showed firms expecting reduced activity and rising prices in early 2025.
Alpesh Paleja, a CBI economist, described the outlook as bleak. “The economy is headed for the worst of all worlds – firms expect to reduce both output and hiring while price growth expectations are firming,” he said.
The government’s decision to increase social security contributions for employers has compounded weak demand, according to Paleja.
Calls for Policy Revisions
Conservative economic spokesman Mel Stride criticized the government’s tax strategy, urging a rethink before planned hikes take effect in April. “Every moment of delay further damages business confidence, output, and employment,” he warned.
Reeves defended the October budget as a long-term growth plan, emphasizing the challenge of reversing “15 years of neglect” under previous administrations.
