Economic Slowdown in Britain

Introduction to the Current State

Britain’s economy has been slowing since the summer, but the long wait for a Budget at the end of November has put added pressure on the brakes, according to the latest growth figures from the Office for National Statistics. A 0.1% monthly decline in GDP in October and a similar decline in the three-month trend were blamed on uncertainty amid an autumnal blizzard of tracks, leaks, and speculation.

Factors Contributing to the Decline

Companies from the production, construction, and services sectors were waiting for the outcome of the budget procedure. This was not the only factor – production was pushed back by the ongoing impact of a significant cyber shutdown, and services, the engine of the economy, stagnated. The uncertainty surrounding the budget has had a tangible impact on the economy, and we can now quantify the cost of the delay.

Impact on Economic Growth

It is also likely that the delay had a negative impact on November numbers, making it likely that the year will end with a quarter of stagnant growth. This raises questions about where a recovery might come from. The slowdown should remove any lingering doubts that the Bank of England will agree to a rate cut at its meeting next week, with the expected quarter-point cut taking the headline figure below 4% for the first time since January 2023.

Future Outlook and Potential Rate Cuts

The pace of cuts beyond this remains uncertain, but if sluggish progress continues, further cuts could come as early as February. Both the bank and the Office for Budget Responsibility expect inflation to continue falling in 2026, which could help the economy emerge from the current slump.

Government Response and Future Projects

The government has stated its determination to defy the forecasts, citing a number of projects as examples of their growth-enhancing qualities, including new runways and a nuclear power station. However, since these projects will be completed in the next decade, and the budget does not provide for any immediate measures to promote growth, it is not clear where the economic recovery will come from. The lack of immediate action to stimulate growth, combined with pending tax increases, raises concerns about the near-term economic outlook.