UK on 'recession watch' as Bank slashes rates to 3.75%

The UK economy grew by an unrevised 0.1% between July and September but expansion was weaker than first thought in the second quarter, according to official figures (JLR/PA) Jaguar Land Rover

The UK economy's growth for the third quarter has been confirmed at 0.1%, while official figures reveal that expansion was weaker than initially thought for the second quarter. The Office for National Statistics (ONS) reported that growth for April to June was revised down to 0.2% from a previous estimate of 0.3%.

The updated figures paint a picture of an economy losing momentum. Liz McKeown, ONS director of economic statistics, said: «Today's updated figures paint the same picture as our initial estimate, with growth continuing to slow in the third quarter.»

Manufacturing hit by cyber attack

The slowdown was driven by sharp falls in production. McKeown noted: «Growth in services were partially offset by falls in production, with a marked drop in car manufacturing.»

A cyber attack at Jaguar Land Rover in September brought production to a halt and is estimated to have cost the UK around £1.9 billion. Research by the Cyber Monitoring Centre found that approximately 5,000 organizations nationwide were affected by the fallout.

Pressure on Chancellor's growth agenda

The downward revisions represent a blow to Chancellor Rachel Reeves' central economic mission. Economists have criticized her tax and spending policies, which include £26 billion in tax raids effective since early April, as contrary to her growth agenda.

The UK's tax burden is projected to reach 38% of GDP by 2030, a post-war record. Real household disposable income per head decreased by 0.8% in the third quarter, following zero growth in the second quarter.

Rate cuts and recession fears

The Bank of England cut interest rates to 3.75% last Thursday, a three-year low, in response to the slowing economy. Analysts have warned that the UK is moving closer to a technical recession.

David Morrison, senior market analyst at Trade Nation, said: «Yet another disappointing economic number for the UK, and one which now puts investors on recession watch. Sterling fall sharply on the news, before recovering around half of its losses.»

Despite the slowdown, the UK remained the joint fastest growing economy in the G7 group of countries alongside Japan, with 0.9% growth, followed by the US. Overall UK growth for 2024 stood at 1.1%.

Note: This article was created with Artificial Intelligence (AI).