In its first estimate of growth in the third quarter, the Office for National Statistics (ONS) presented a bleak picture of the economy ahead of next week’s Autumn Statement by Chancellor Jeremy Hunt. Activity in the services sector stalled, with zero growth in the quarter, as consumer spending fell as households came under increasing pressure from the cost-of-living crisis. Growth in the manufacturing sector slowed, while factory output fell due to a sharp decline in manufacturing as some firms continued to face supply chain difficulties and shortages of key materials. The Bank of England expects the latest gross domestic product figures to be the start of a protracted recession in the UK – as rising interest rates and the cost of living weigh on activity – that will last until the end of next year. Another negative growth rate for the last three months of 2022 would confirm a technical recession. The economy grew by 0.2% in the second quarter of 2022. Hunt said the global economy was facing a period of “extreme turbulence” but that “the fundamental resilience of the UK economy is cause for optimism in the longer term”. He added: “I am under no illusion that there is a difficult road ahead – one that will require extremely difficult decisions to restore confidence and economic stability. But to achieve long-term, sustainable growth, we need to contain inflation, balance the books and get the debt down. There is no other way.” The ONS said the economy’s performance in the three months to September was affected by the extra bank holiday for Queen Elizabeth II’s funeral, which led to weaker activity. The economy shrank by 0.6% in September alone as shops and other businesses closed their doors as a mark of respect, with about half of the decline attributable to the mourning period, with extended closures leading to a larger fall than usually for bank holidays. Alpesh Paleja, chief economist at lobby group the Confederation of British Industry, said that even taking into account the additional bank holiday, it was clear that underlying activity had weakened. But he warned the chancellor against embarking on an austerity drive that would further stifle growth. “A weaker growth outlook and persistently high inflation will make for some difficult economic policy decisions. The autumn statement should learn the lessons of the 2010s,” he said. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. The snapshot comes amid growing fears about the strength of the economy as households cut spending amid the highest inflation rates since the early 1980s, alongside a dramatic rise in mortgage costs for some families following the disastrous mini-budget by Liz Truss. The ONS said there was a sharp fall in property purchases, sales and rentals in September, down 0.9%. Figures earlier this week from Halifax, the UK’s biggest mortgage lender, showed a fall in house prices last month after the ill-fated mini-budget pushed up borrowing costs. Rachel Reeves, Labour’s shadow chancellor, said the latest figures represented “another failure page in the Tories’ growth record” after a decade of underinvestment and widening inequality. “The reality of this failure is that family finances are devastated, British businesses are left behind and more anxiety about the future,” he said.
