The UK's economic recovery has hit a worrying slowdown, with new official figures revealing growth nearly stalled in the first quarter of the year. The data deals a significant blow to Chancellor Rachel Reeves, who has placed economic expansion at the heart of the government's agenda.
Sluggish Growth and Missed Targets
The Office for National Statistics (ONS) reported that GDP expanded by a mere 0.1% between January and March. This figure was notably worse than the modest growth analysts had been expecting, highlighting the fragility of the nation's economic health.
This weak performance was preceded by a contraction in September, where economic activity dipped by 0.1%. The consecutive poor results paint a picture of an economy struggling to gain any meaningful momentum.
Sectoral Weakness and Contributing Factors
Liz McKeown, Director of Economic Statistics at the ONS, provided a detailed breakdown of the sectors driving the weakness. "Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period," she stated.
McKeown highlighted a particular contraction in production, with manufacturing being a primary driver of the decline. She pointed to a "particularly marked fall in car production in September," attributing it partly to the impact of a cyber incident. The often-volatile pharmaceutical industry also saw a decline.
On a more positive note, the services sector remained the main contributor to growth. Business rental and leasing, live events, and retail all performed well. However, these gains were partially offset by falls in research & development and a downturn in hair and beauty salons.
Political Fallout and Budget Pressure
The grim economic numbers heap immense pressure on Chancellor Rachel Reeves just weeks before her crucial Budget on November 26. The government, led by Reeves and Prime Minister Keir Starmer, has consistently argued that robust growth is the only sustainable way to improve living standards for Britons.
However, the Chancellor's previous decision to hike national insurance for employers has been widely criticised by the business community, with many blaming this policy for crushing economic activity. The new data will intensify the debate over her fiscal strategy, with fears mounting that the upcoming Budget may include further tax rises in an attempt to balance the books.
