UK real gross domestic product neither grew nor contracted in the third quarter with the headline quarter-on-quarter GDP growth rate estimated at 0.0% for Q3.

Whilst this was better than was expected the growth picture was weaker than in the second quarter of 2023, when the economy expanded by just 0.2% quarter-on-quarter.

Following the release of the statistics industry experts have shared their thoughts on what this means going into to 2024 and for the economy more generally.


John Glencross, CEO and Co-Founder of Calculus, said: “Today’s GDP data signals a continued lethargy in the UK economy. Though this challenging economic environment appears stubborn, we are encouraged by the recent and significant revision of historical growth which changes the picture of the immediate post-pandemic recovery, notably compared to our European neighbours. There are also signs of long-term and credible support for UK business, and it will be interesting to see how this develops.”

“As this downturn in the economy continues, the smaller end of the UK market requires attention to spur significant growth in Britain. The Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) continue to support this section of the market – igniting growth and championing innovative UK companies. Calculus launched the first approved EIS fund 23 years ago. We are steadfast in our support of UK SMEs and with our invaluable experience of scaling companies in fast growing sectors, we can continue to provide innovative and tax-efficient venture capital investment opportunities for investors.”

Richard Flax, Chief Investment Officer at Moneyfarm, comments: “The UK economy has stagnated in Q3, and while this may be underwhelming, it is slightly better than the negative 0.1 contraction anticipated by economists. While the GDP is estimated to have increased by 0.6% in Q3 compared to the same time last year, Q3 has been the worst performing quarter this year. While the economy continues to avoid a recession, according to the Bank of England’s forecasts, the UK economy will likely see no growth until 2025. With interest rates currently at 5.25% and projected to remain at an elevated level for the foreseeable future, we can expect a subdued picture across all parts of the economy. 


“Today’s data also draws a stark comparison with the US. While the UK economy is stagnant, the US economy continues to show a robust expansion, at nearly 5% growth in Q3 and so far defying expectations of an impending recession.” 

Rob Morgan, Chief Investment Analyst at Charles Stanley, comments: “Having eked out quarterly growth of 0.3% and 0.2% during the first and second quarters of 2023, the UK economy stagnated in the third quarter, proving a little more resilient than expected, flatlining rather than falling, as inclement weather in July and August dampened activity. Consumer spending has so far been held up by lower fuel prices alongside low unemployment levels and strong wage growth, though these factors may not be enough to stave off tighter financial conditions and recessionary pressures in coming months.

“The full impact of previous interest rate increases is yet to be felt by some households and businesses that secured their debt in a much lower rate environment. Monetary policy has therefore had a significantly lagged effect on the economy as fixed rate mortgages and loans run to their terms. As earlier turnings of the interest rate screw show up more clearly in economic data, we can expect the picture to weaken further as interest rates remain in restrictive territory to ensure inflationary pressures are vanquished.


“Today’s data will be influential in the Bank of England December’s monetary policy outlook, and it most likely means a holding pattern for interest rates. While economic cracks are appearing, overall activity is holding up reasonably well, which means inflationary pressures may not abate quite as quickly as the BoE would like. The numbers aren’t strong enough to bring a further rate rise from the current 5.25% into play, but it will temper calls for earlier cuts a little too.”

Derrick Dunne, CEO of YOU Asset Management, commented: “The news from the ONS this morning, that monthly real gross domestic product is estimated to have flatlined in the period from July to September, brought a run of encouraging data to an abrupt – but expected – end.

“Despite the worsening outlook for growth, Bank of England governor Andrew Bailey has made clear that inflationary pressures at home, and the risk of war in the Middle East, would force the Bank to keep borrowing costs high for the foreseeable future.


“Meanwhile, October sales figures from the British Retail Consortium paint a bleak picture and suggest a further price we’re paying for curbing inflation is weaker consumer confidence and depressed sales.

“ Anyone unsure about how the ongoing uncertainty might impact their long-term investment plans should contact their financial adviser.”

Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services said: “ONS data released today reveals flatlining in GDP, reflective of the lagged effect of the Bank of England’s aggressive rate hikes on economic activity. These figures represent a grinding continuation of the UK’s lacklustre economic performance, a period of weakness stretching back more than two years.  


“The data shows that fragility has permeated across economic sectors. Stagnation in the service sector has coincided with weakness in construction activity and manufacturing production and output. Industrial action by doctors and rail workers has contributed to a weak outturn from the transportation and healthcare sector, while weak high street activity has contributed to downbeat service sector performance, which was already dampened by squeezed consumer spending even as inflationary pressures abate. 

“Nonetheless, there is a glimmer of encouragement in today’s trade data. Export volumes rose more than import activity, supported by the sterling’s resilience against trading counterparts.  

“Although the Bank may have concluded its rate hiking programme, the lagged impact of monetary policy tightening will continue to impart downward pressures on economic activity in the months to come. The Bank will not drop its guard until inflationary pressures are long gone – likely well into 2024.” 


Lindsay James, investment strategist at Quilter Investors: “GDP figures today confirmed a UK slowdown that has been increasingly signalled by leading indicators in recent months, with cracks having appeared in consumer spending and business activity with a knock-on effect for labour demand. September’s data did positively surprise thanks to the UK’s strong services sector, but was not enough to offset July’s negative print and produce any growth in Q3 relative to the previous quarter. While somehow avoiding a recession this year, today’s no growth reading means the UK economy is flatlining with only 0.2% economic growth in the last six months.

“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 UK economy faces growing headwinds as we approach 2024. Whilst inflation data may soon provide some signs of cooling, uncertainty remains over the direction of energy prices due not only to the risk of the crisis in the Middle East expanding, but also resulting from the ongoing disruption to global gas supplies eventually feeding through to the Energy Price Cap. 

“With the UK one of the closest of all advanced economies to a stagflation scenario, this leaves the Bank of England with the difficult predicament of how long they can maintain rates at this level given the increasingly apparent impact on GDP. And with 2024 very likely to be an election year, the timing couldn’t be worse for the government to be heading into what feels like a recessionary period.”


Douglas Grant, Group CEO of Manx Financial Group PLC, said: “Latest GDP figures show that UK economic progress remains increasingly bleak, heightening the challenges faced by SMEs as the country narrowly avoids a recession. SMEs must take this as a reminder to review their existing lending structures and ensure they are prepared to navigate further economic turbulence.

“While some SMEs prepared for lethargic GDP growth by locking in their debt into fixed rate structures, the economic situation for other businesses that were not as forward-thinking, is potentially cataclysmic. Recent research conducted by Manx reveals a significant shift in the financial landscape for SMEs. Compared to last year when only a quarter encountered obstacles, two in five SMEs have now either halted or slowed down some aspect of their operations due to a lack of external financing. Furthermore, the survey uncovered that 15% of SMEs in need of external finance and/or capital were unable to access the required funds. Access to financing is key for the growth of SMEs and the UK economy and it is more important than ever to provide a turning point in the cost-of-living crunch.

“Following the implementation of short-term loan schemes in the last few years, we believe that it is vital that the government continues to expand measures to strengthen SME resilience. Our proposition revolves around the establishment of a permanent government-backed loan scheme, tailor-made for various sectors, and involving both traditional and non-traditional lenders. As the government looks for ways to power the economy’s resurgence, a permanent scheme could serve as a critical factor in unlocking economic recovery for many companies, and in turn, sustain our economy.”


Nathaniel Casey, Investment Strategist at wealth manager Evelyn Partners, comments: “The UK economy managed to dodge a contraction in the third quarter, just edging out the 0.1% contraction that has been forecasted by economists, to instead show no growth for the quarter. This was driven by September’s monthly growth data which at 0.2%, was ahead of the expected flat growth forecast for the month. This means the UK economy is not yet teetering on the verge of a technical recession, which is defined as two consecutive quarters of negative GDP growth. On a year-on-year basis the UK economy has expanded by 0.6% over the last 12 months.

“Despite a strong start to the first half of the year, consumption has now started to wane, with the sector contributing -0.2 percentage points to the QoQ real GDP figure. Within this, retail sales contracted by near 1% QoQ with consumer facing services contracting by a more pronounced 3%. Higher interest rates have likely weighed on discretionary spending over the summer, prompting a deterioration in consumer confidence. Further evidence of higher rates filtering through into the real economy could be seen from residential investment which fell 1.7% QoQ marking its fourth consecutive quarterly decline. 

“Government spending also weighed negatively on the quarterly growth rate, contributing -0.1 percentage points. Real government consumption expenditure fell by 0.5% in the third quarter following an increase of 2.5% in the previous quarter. The fall in government consumption in the latest quarter mainly reflects lower spending on health and on education, which fell by 1.4% and 0.3%, respectively. 


“The figures are not all doom and gloom with an improvement in net trade for Q3 contributing 0.4 percentage points to the QoQ rate. Export volumes increased by 0.5% in the third quarter, following a fall of 0.9% in the second quarter. The increase was driven by a 2.8% rise in services exports, which offset a fall of 2.0% in goods exports. Import volumes fell by 0.8% in the third quarter. This decline was driven by a 3.5% fall in goods imports, which offset a 4.2% increase in services imports.

“Similarly, inventories remained a positive contributor to the headline figure, as it has now for four consecutive quarters, adding 0.2 percentage points to the QoQ growth figure. 

“Looking ahead, the lagged impacts of tight monetary policy are beginning to impact the UK economy, as the cost of capital increase, households will experience a reduction in disposable incomes as aggregate mortgage payments tick up. However, as the labour market remains tight with unemployment at near recent lows and wage growth remaining elevated, this should act as a partial buffer for any downside potential on consumption heading into Q4 and into next year. 

“Although the BoE have seemingly paused on interest rates with markets pricing in only a c.20% chance of one more hike over the next three meetings, it does not mean rate cuts are on the immediate horizon. However, BoE chief economist Huw Pill recently hinted at rate cuts materialising sooner than participants expected. With the economic growth picture deteriorating and inflation starting to come under control it could prompt the BoE to cut rates as soon as Mid 2024. 

“With the UK economy managing to avoid contraction in the third quarter the risks of an imminent technical recession have been delayed for now. However, as the impact of higher interest rates continue to put the brakes on consumption, the resulting drag on the real economy could lead to negative economic growth in the coming quarters which might prompt the BoE to cut rates sooner than expected.”

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