The UK’s economy stalled in the first three months under the new Labour government, marking 0.1 percent growth in the quarter to September.
This is a drop from the 0.5 percent growth between April and June, the Office of National Statistics (ONS) said on Friday.
September saw GDP shrink by 0.1 percent, following unrevised growth of 0.2 percent in August, and up from no growth in June or July.
The news of sluggish growth in the first three months after Labour came to power comes as an unwelcome development for the party whose ambition is to secure the highest sustained growth in the G7.
Responding to Friday’s growth data, Chancellor Rachel Reeves said she is “not satisfied” with the figures.
“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers. At my Budget, I took the difficult choices to fix the foundations and stabilise our public finances,” she said.
“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,” she added.
The government has stressed that it inherited a broken economy from its predecessors and warned that tough decisions are necessary to tackle the “£22 billion black hole” in public finances.
Measures introduced in the October Budget are set to lead the UK out of economic stagnation and on the path of growth, according to the Treasury. Several tax hikes announced in the Budget will come into force next year, but have been met with opposition by many businesses and campaigners.
Output Figures
The latest slowdown in growth was driven by a fall in the production sector (0.2 percent), including declines in the supply of electricity, gas, and water.Output in the services sector—closely watched by the BoE and accounting for more than 80 percent of total UK economic output—increased by just 0.1 percent, compared to 0.6 percent growth in the preceding quarter.
Some good news came from construction, where output grew by 0.8 percent, following three consecutive quarterly falls. However, compared with the same time a year ago, construction output was 0.4 percent lower.
Commenting on the figures, shadow chancellor Mel Stride said that Labour was to blame for “talking the economy down” after the election win.
“Across that quarter, across the summer, what the Labour government did in order to justify what they planned to do all along, which was to substantially hike taxes … it was their mission to talk down the UK economy.”
“I’m afraid they’re reaping to a degree what they’ve done in terms of talking the economy down. And of course now what they’ve done is follow it up with a budget that has indeed ramped up taxes, particularly taxes that are going to bear down on growth,” he said.
However, according to the Chairman of the Business and Trade Committee Liam Byrne, sluggish growth comes as a result of “really long-term problems in the British economy.”
He said that the UK needs a boost to its economic investment rate to get back on track.
“We’re in quite a difficult position at the moment and we’re going to need some pretty bold and pretty quick measures from our government,” Byrne said.
