UK on the brink of recession with warning economy heading for 'worst of all worlds'

Photo: independent.co.uk

Rachel Reeves’s Budget is being blamed for driving growth expectations down to the weakest level in over two years, GB News reports. Rachel Reeves is a British Chancellor.

The UK economy is heading "for the worst of all worlds" as gross domestic product (GDP) showed no growth in the third quarter of 2024, according to official figures.

The stagnation comes as business groups warn that activity is set to fall at the start of the new year.

The Office for National Statistics said that UK GDP showed no growth between July and September, in the run up to the Autumn Budget. Statisticians had previously estimated 0.1 per cent growth for the quarter.

Alpesh Paleja, the Confederation of British Industry (CBI) interim deputy chief economist said: "There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds - firms expect to reduce both output and hiring, and price growth expectations are getting firmer."

The impact on employment is particularly severe, with the CBI survey of 899 firms showing that private sector employment "will be cut sharply" in the first quarter of 2025..

Many employers are weighing up whether to cut their workforce to response to the rise in National Insurance at a time when the economy is grinding to a halt.

Alex Perkins, who has run the Weybridge business for the past 16 years, said it was the first time since the recession in 2009 that he had been forced to let staff go.

Andrew Griffith, conservative business spokesman accused Reeves of creating "a hostile climate for aspiration, for investment, and for growth".

He said: "The Chancellor's tax-raising spree and trash-talking her economic inheritance is literally killing businesses and jobs.

"If there is a recession – and based on these CBI expectations that seems increasingly likely – it will be one made in Downing Street. Labour need to urgently change course before the damage they are doing becomes even greater."

Nearly half of firms (48 per cent) are planning to reduce staff numbers, whilst 62 per cent have scaled back their pre-Budget hiring plans.

The British Retail Consortium has reported that consumer confidence about the economy has "nosedived" since the Budget.

Helen Dickinson, the consortium's chief executive, warned that retailers face difficult choices as sales struggle to keep pace with rising costs.

She said retailers "will have no choice but to raise prices or cut costs – closing stores and freezing recruitment."

The employers' organisation said the outlook for the start of 2025 was "firmly negative" across all main sectors, including manufacturing, services and retail.

The downbeat economic readings provide a blow to Reeves and the Government’s hopes to grow the economy rapidly.

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