UK economy sees weaker-than-expected growth in November

Chancellor Rachel Reeves has insisted she will “fight every day” to deliver economic growth after the latest official figures showed weaker-than-expected expansion in November.

The Office for National Statistics (ONS) estimated the UK economy grew in November by 0.1% after falling by 0.1% in both September and October.

While a welcome return to growth, most economists were expecting gross domestic product (GDP) to rebound by 0.2% in November.

The figures come after a difficult past couple of weeks for the Chancellor, after government borrowing costs surged and the value of the pound slumped amid worries over the economy and UK debt levels.

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Markets calmed on Wednesday after a surprise fall in inflation, offering some welcome respite to Ms Reeves.

But the paltry growth for November means the economy would need to grow by at least 0.1% in December just to avoid contracting overall in the final quarter of the year.

Ms Reeves said: “After 14 years of economic stagnation, this Government’s number one mission is to grow our economy.

“I will fight every day to deliver that growth and put more money into working people’s pockets.”

She will hold a meeting with regulators in No 11 on Thursday as she attempts to cut red tape and remove barriers to investment to kickstart sluggish growth.

Ms Reeves and Business Secretary Jonathan Reynolds will gather the bosses of the Competition and Markets Authority, Ofcom, Ofwat, Ofgem, the Office of Rail and Road, the Environment Agency and the Civil Aviation Authority to look at reforms to the way they work.

The Bank of England has pencilled in no growth again for the fourth quarter, following zero expansion in the previous three months.

There are mounting fears the economy is heading for a period of so-called stagflation, where there is little or no economic growth combined with persistent inflation.

While figures on Wednesday showed inflation edging back to 2.5% last month from 2.6% in November, many economists believe it will rise close to 3% in the coming months.

The November GDP figures take in the period after Ms Reeves’ first Budget on October 30, which saw her announce £40 billion of tax rises including a hike in employers’ national insurance.

HSBC’s senior UK economist Liz Martins said the “mood music is not great” with the UK economy stagnating.

She told BBC Radio 4’s Today: “We had zero growth in the third quarter of this year, a bad start to the fourth quarter, and this number hasn’t done enough to offset that bad start.

“So it does suggest that we’re going to have very low or zero growth for the final quarter as well.

“We’re not in recession but we’re not doing much growing either.”

But the lower-than-forecast data for November, combined with Wednesday’s unexpected fall in inflation is seen as boosting chances of an interest rate cut when the Bank next decides in February.

Barret Kupelian, chief economist at PwC, said: “We are clearly far off from a state where the economy has reached ‘escape velocity’ and grows on a sustained basis.

“Given the latest inflation reading yesterday, weaker than expected growth could help pave the way for faster rate cuts by the Bank of England.”

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “The MPC will now certainly cut rates in February.”

But he said with inflation set to start heading back up, “we think the Monetary Policy Committee will have to give more hawkish guidance about the pace of rate cuts after February, paring back to signalling two to three cuts this year.”

The latest figures showed the all-important services sector drove the return to growth, with output in the sector rising 0.1%.

Construction also grew, up by 0.4%, led by new commercial developments, though production continued to decline, down by 0.4% in November.

Liz McKeown, ONS director of economic statistics, said: “Services grew a little, with wholesaling, pubs and restaurants and IT companies all doing well, partially offset by falls in accountancy and business rental and leasing.”