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The UK economy shrank slightly in the third quarter, according to revised figures that highlight the country’s struggle to shake off its low-growth performance.
The Office for National Statistics said on Friday that gross domestic product fell by 0.1 per cent in the three months to September, a downward revision from previous estimates of zero growth.
The economy failed to grow in the second quarter — a downward revision from the earlier estimate of a 0.2 per cent increase.
The UK economy is stuck in a lacklustre state as it struggles with high borrowing costs and the legacy of the worst inflationary upsurge for a generation.
Output fell another 0.3 per cent in October compared with the month before, according to separate figures released earlier this month, suggesting there is a risk of a further quarter of contraction absent a sharp reversal in activity.
Bank of England projections released in November suggest there is little immediate prospect of a bounceback. The central bank forecast near-zero growth through next year, even as the worst of the inflation subsides.
The third-quarter GDP figures were dragged lower by weak business investment and personal spending numbers, with real household expenditure sinking 0.5 per cent and the savings ratio going up. Business investment dropped 3.2 per cent, slightly less than previously estimated.
The ONS reported a 0.2 per cent fall in output from the services sector in the three months to September, which offset a 0.4 per cent rise in construction output and slightly higher production output.
The figures put UK output at 1.4 per cent above its pre-pandemic level, meaning the country has lagged behind all its G7 partners excluding Germany. The US had been the strongest performer of the group of advanced economies over the period, the ONS said, with GDP up 7.4 per cent compared with the final quarter of 2019.
Chancellor Jeremy Hunt played down the tepid numbers, saying Britain’s medium-term outlook was “far more optimistic than these numbers suggest”.
He added: “We’ve seen inflation fall again this week, and the OBR [Office for Budget Responsibility] expects the measures in the Autumn Statement, including the largest business tax cut in modern British history and tax cuts for 29mn working people, will deliver the largest boost to potential growth on record.”
In an interview with the Financial Times this week, Hunt said 2024 was “when we need to throw off our pessimism and declinism about the UK economy” and raised the prospect of the BoE cutting interest rates.