Britain's Economic Setback

By Andy Bruce

(Reuters) – Britain's economy contracted unexpectedly in September, with growth slowing to a crawl over the third quarter, as reported on Friday. This poses an early setback for Finance Minister Rachel Reeves' ambitions to stimulate a sustained economic pickup.

Gross domestic product (GDP) slipped by 0.1% in September, as the services sector flat-lined, and both manufacturing and construction saw declines, according to the Office for National Statistics.

For the entire third quarter, the economy only grew 0.1%, a decline from the 0.5% growth in the second quarter.

Economists polled by Reuters and the Bank of England had anticipated an expansion of 0.2% for the July-September period, indicating a slowdown from the rapid growth observed in the first half of 2024, which was recovering from last year's mild recession.

Reeves remarked, "Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers."

She continued, "Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain, and secure our borders in a decade of national renewal."

Last week, the Bank of England adjusted its annual growth forecast for 2024 down to 1% from 1.25%, but indicated a better outlook for 2025, spurred by the ambitious budget plans outlined by Reeves.

Since the COVID-19 pandemic, Britain’s economic output has grown only sluggishly. In fact, only Germany, which experienced significant energy cost surges following Russia's invasion of Ukraine, has performed more poorly among the largest advanced economies.

Prime Minister Keir Starmer has expressed his goal of achieving 2.5% annual growth during campaigning for the July 4 election—a rate that Britain hasn't regularly attained since the 2008 financial crisis.

Reeves aims for Britain to secure the fastest GDP per capita growth among the G7 advanced economies for two consecutive years.