The United Kingdom’s economy showed no growth in the third quarter, according to initial figures released on Friday. Gross domestic product (GDP) remained flat in the three months to the end of September, following a modest increase of 0.2% in the previous quarter. In annual terms, the third-quarter GDP was 0.6% higher than the same period in 2022.
The lackluster performance was driven by a 0.1% drop in the services sector, which was partly offset by a 0.1% increase in construction performance, while the production sector remained unchanged. U.K. Chancellor of the Exchequer Jeremy Hunt pointed to high inflation as the “single greatest barrier to economic growth” in the country, with the consumer price index remaining at 6.7% year-on-year in September.
Hunt emphasized the need to tackle inflation as a means of stimulating sustainable economic growth, and promised that the upcoming Autumn Statement would focus on unlocking investment, revitalizing employment, and reforming public services to drive the growth that the country needs.
Lindsay James, an investment strategist at Quilter Investors, noted that the third-quarter figures confirmed a looming slowdown that has been signaled by leading indicators over the past few months. Despite a positive surprise in September’s data due to the strength of the UK’s services sector, the overall lack of growth in the third quarter leaves the UK economy essentially flatlining.
“Unfortunately, for many, the economic pain has only been delayed. As the Bank of England stated earlier this month that more than half of the impact of higher interest rates on the level of GDP is still to come through, the U.K. economy faces growing headwinds as we approach 2024,” James said.
The economic stagnation in the UK highlights the challenges facing policymakers as they seek to revitalize the country’s growth trajectory amid ongoing inflationary pressures.