Britain’s economy showed no growth in the first three months of the new Labour Government, revised figures indicate.
Growth from July to September was revised down from 0.1 per cent to zero by the Office for National Statistics (ONS), pushing Britain to the brink of a recession.
In the second quarter of the year – April to June – growth was also downgraded, from 0.5 per cent to 0.4 per cent.
With the economy at risk of contracting in the final three months of 2024, according to the Bank of England, it means the country is close to experiencing the first of two consecutive quarters of negative growth that define a technical recession.
How does the UK compare to the rest of the G7?
Before the election, Labour said it wanted the UK to have the highest sustained growth in the G7 – which includes France, Germany, Italy, Japan, Canada and the US – but today’s revised figures show this mission has got off to a bad start.
The UK was the joint-slowest member of the G7 in the third quarter of the year, with no growth in July to September.
Here are the latest growth estimates from other leading advanced economies for comparison:
- US: grew by nearly 0.8 per cent.
- France: grew by 0.4 per cent.
- Japan: grew by 0.3 per cent.
- Canada: grew by 0.3 per cent.
- Germany: grew by 0.1 per cent.
- Italy: stagnated.
Julian Jessop, economist, said: “Growth in Q3 has been revised down from 0.1 per cent to zero, taking the UK from joint top of the G7 league table in the first half of the financial year to bottom. GDP per head also fell 0.2 per cent, with only Canada doing worse.”
Mr Jessop said that the Confederation of British Industry (CBI)’s latest growth indicator adds evidence that the UK is sliding back into recession and may already be in one in terms of GDP per head.
Following the release of these new figures, the CBI lobby group warned that the UK economy was “headed for the worst of all worlds” as firms came under pressure, with activity set for a “steep” decline in the first three months of 2025.
Paul Dales, the chief UK economist at the consultancy Capital Economics, said the downward headline revision appeared to be mainly due to external influences such as a bigger fall in exports and investment in dwellings than originally estimated. Consumer spending and business investment was revised up.
Mr Dales said: “This leaves plenty of scope for a lively debate with the family over the festive period about whether or not the economy is heading for a recession.
“Our hunch is that 2025 will be a better year for the economy than 2024. But more recent data suggest the economy doesn’t have much momentum as the year comes to a close.”
Why have growth figures changed?
The ONS said the downgrade was driven by bars and restaurants, legal firms and advertising performing less well than it first expected.
Liz McKeown, director of economic statistics at the ONS, said: “The household saving ration fell a little in the latest period, though remains relatively high by historic standards.
“Meanwhile, real household disposable income per head showed no growth.”
The Bank last week warned UK growth would stagnate in the final three months of the year.
Although falling short of the technical definition of a recession – regarded as two quarters of negative growth – the downgrade will come as a blow to the Government after it made reviving growth its number one priority.
Labour has faced a challenging start in Government, coming under lots of scrutiny over its downbeat assessment of the economy after blaming the Conservative party for leaving them with a £22bn fiscal black hole to fill.
Chancellor Rachel Reeves said she was left with no choice but to raise taxes in the Autumn Budget because of this, but defended those measures, while arguing that the Government was focused on driving up “sustainable long-term growth” by reforming the economy.
Does today’s figure change come as a surprise?
Earlier this year, the Organisation for Economic Cooperation and Development (OECD) predicted that the UK will be the worst-performing economy in the G7 next year.
The Paris-based think-tank blamed high interest rates and the lingering effects of last year’s surge in inflation drag on growth in the downbeat assessment.
It also downgraded its forecast for UK growth this year to 0.4 per cent from a November forecast of 0.7 per cent.
These predictions put the UK at the bottom of the G7 growth league in 2025, with growth of 1 per cent, just behind Germany at 1.1 per cent.
The US and Canada are forecast to be the fastest growing economies in the G7 next year, both growing 1.8 per cent.
The OECD said Britain’s growth rate would be dampened by persistent price rises in the services sector and shortages of skilled staff that will push back expected cuts in interest rates.
