The latest growth figures indicate a slowdown in the UK economy, with only 0.1% growth recorded in the July-to-September quarter, falling below expectations. Additionally, the economy contracted in September, primarily due to a significant drop in car production following a cyber-attack on Jaguar Land Rover. This unprecedented decline in vehicle output was identified as a contributing factor to the overall poor growth figures.
The Office for National Statistics (ONS) noted that had vehicle production remained stable in September, GDP would have seen an increase. However, there are broader indicators of economic momentum waning, particularly in consumer-facing services and business investment, which are now of particular concern. High employment costs and ongoing uncertainty in the economic landscape are also affecting consumer behavior and business investment decisions.
Looking ahead, the upcoming Budget aims to stabilize speculation surrounding tax changes. Plans include creating a stronger buffer against fiscal shocks and revisiting the frequency of assessments on the Chancellor’s borrowing rules. However, implementing stability may come with trade-offs, such as potential tax increases.
There are indications that the Bank of England may consider a rate cut in the near future, which could continue through the following year. The decline in government borrowing costs and reduced fixed mortgage rates reflect this possibility. While the Chancellor may see the current figures as a justification for stringent fiscal policies, the property market is facing challenges from ongoing tax change speculations.
Despite a relatively robust performance earlier in the year, the UK economy has struggled to sustain growth, particularly when accounting for population size. The Budget will need to strike a delicate balance between providing certainty, boosting consumer and business confidence, and addressing a significant fiscal deficit. The recent growth figures have intensified the stakes for the forthcoming Budget.
Source: https://www.bbc.com/news/articles/c93x5xw22n6o?at_medium=RSS&at_campaign=rss