UK economy griding to a halt as spectre of recession begins to loom

Lindsay James, investment strategist at Quilter, comments on the latest UK GDP quarterly national accounts data, warning that the economy is losing momentum after a relatively stronger first half of the year, with growth slowing sharply, little support expected from recent Budget measures, and mounting risks that weak activity, stubborn caution and policy constraints could leave the UK facing an increasingly fragile outlook.

Lindsay James, investment strategist at Quilter:

“Today’s GDP data all but confirms what has become very clear in the second half of the year – the UK economy is grinding to a halt and showing little sign of achieving what it did in the first half of the year. The GDP quarterly national accounts confirms the UK economy grew by just 0.1%, compared to 0.2% in the second quarter of the year which was revised down from 0.3%, and 0.7% in the first. Growth was primarily driven by 0.2% increases in services and construction, while the production sector added downward pressure with a fall of 0.3%.  

“Going forward, November’s Budget measures will do nothing for growth after the OBR forecasted zero impact from the policies introduced at the despatch box. Instead, the government is going to have to hope that previous measures taken to date begin to bear fruit, or that geopolitical challenges calm down enough that global trade can rebound. Unfortunately, neither seems particularly encouraging right now and as such the first half of next year is likely to be more of the same, if not worse with the spectre of recession beginning to loom.

“The good news is that inflation should continue to moderate and be helped downwards by a reduction in energy bills come April. However, despite unemployment rising, the Bank of England suggested last week that future rate cuts may be harder to come by as it continues to have laser focus on keeping inflation in check. As such, the government is ultimately on its own in stimulating the economy back to life. Should it fail to resuscitate it quickly then the political volatility we have become accustomed to is likely to return.”