Revised figures confirm the UK economy recorded zero growth between July and September, adding to a string of concerning economic indicators. Recent data revealed inflation surging at its fastest rate in eight months, coupled with an unexpected economic contraction in October.

The Confederation of British Industry (CBI), one of the country’s foremost business groups, warned of worsening conditions, stating the economy faces “the worst of all worlds.”

Chancellor Rachel Reeves acknowledged the significant challenges ahead, emphasizing the need to rebuild the economy after “15 years of neglect.” Shadow Chancellor Mel Stride criticized the figures, asserting that “growth has stagnated under Labour’s watch.”

Government Under Pressure

The revised data is a setback for the government, which has prioritized economic growth. Labour has pledged to achieve the highest sustained economic growth among the G7 nations, but businesses are raising alarms over potential fallout from the October Budget.

Key measures, including higher employer national insurance contributions (NICs) and an increased minimum wage, will take effect in April. Critics warn these policies could lead to job cuts and higher prices, with Stride cautioning that the economy’s pre-Budget performance signals “warning lights” for 2025.

Chancellor Reeves defended the government’s approach, promising “sustainable, long-term growth” through increased investment and reforms. Meanwhile, Liberal Democrat treasury spokesperson Daisy Cooper called for reversing the NIC tax hike and scrapping the current business rates system to support small businesses.

Business Outlook Dims

A CBI survey of 899 firms conducted from November to December revealed bleak expectations, with businesses anticipating a “steep decline in activity” in early 2025. Interim deputy chief economist Alpesh Paleja noted that sentiment is at its lowest point in over two years.

Retailers also face challenges, as the British Retail Consortium (BRC) highlighted dwindling public confidence in the economy. Chief executive Helen Dickinson warned of a “January spending squeeze,” which could force retailers to cut costs by closing stores and freezing recruitment.

Interest Rates and GDP Revisions

The Bank of England recently held interest rates steady, citing worse-than-expected economic performance and stagnation in the final quarter of 2024.

The Office for National Statistics (ONS) also revised GDP growth for April to June down to 0.4% from 0.5%, attributing the slowdown to weaker performance in hospitality, legal, and advertising sectors.

As the UK grapples with stagnant growth and economic uncertainty, businesses and policymakers face mounting pressure to navigate a challenging path forward.