The UK economy expanded by a modest 0.1% in the third quarter, according to official figures released on Friday, narrowly avoiding a technical recession. The Office for National Statistics reported that growth was driven by the services sector and construction, while manufacturing output fell.
Services and Construction Drive Growth
The services sector, which accounts for around 80% of the economy, grew by 0.2% in the quarter, with particular strength in information and communication, and professional services. Construction output rose by 0.4%, boosted by infrastructure projects. However, manufacturing contracted by 0.6%, reflecting ongoing challenges in the sector.
Economic Outlook Remains Uncertain
Despite the positive headline figure, economists caution that the economy remains fragile. The Bank of England has raised interest rates 14 times since December 2021 to combat high inflation, which has dampened consumer spending and business investment. The UK is still facing a cost-of-living crisis, with real wages falling and household budgets squeezed.
Chancellor of the Exchequer Jeremy Hunt said the government is "on track" to halve inflation this year, but acknowledged that "there is still work to do." He emphasized the importance of sticking to the government's economic plan to promote growth.
Labour's shadow chancellor Rachel Reeves criticized the government's record, saying that "after 13 years of economic failure, working people are worse off." She called for a new approach to boost investment and productivity.
The ONS also revised down its estimate for the second quarter from 0.2% growth to 0.1%, indicating that the recovery has been weaker than previously thought. The UK economy remains 1.4% smaller than its pre-pandemic peak in late 2019.
Looking ahead, many forecasters expect the economy to stagnate in the final quarter of the year, raising the possibility of a recession in 2024. The IMF has forecast that the UK will have the slowest growth among advanced economies next year.
