Star Metro - UK economy stagnant in third quarter in fresh setback

Gross domestic product showed zero growth in the July-September period, revised down from an initial estimate of 0.1 percent growth, the Office for National Statistics (ONS) said in a statement.

The data covers the period of the Labour government's first few months in office in the lead up to its highly anticipated maiden budget at the end of October.

The figures are a knock to Prime Minister Keir Starmer who came to power in July promising to boost economic growth after 14 years of Conservative rule.

The government is also struggling to get British businesses on side after its budget included sharp tax hikes for companies -- which is set to bring in around £25 billion ($31 billion).

"There’s not much merriment around for the UK’s economic prospects," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"The economy stood still between July and September, and that was before the budget cast another chill, and caused output to shrink in October," she added.

The revised figure lags further behind economic forecasts of 0.2-percent growth, with analysts partly attributing the slowdown to uncertainty ahead of the budget.

- 'Worst of all worlds' -

"The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge," said finance minister Rachel Reeves in response to Monday's figures.

"But this is only fuelling our fire to deliver for working people," she added.

The ONS also revised down its second quarter growth reading to 0.4 percent from 0.5 percent.

On Monday, British business lobby group CBI warned of a "steep" decline in private-sector activity in the first quarter of 2025, citing the impact of tax hikes announced in the budget.

"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," said Alpesh Paleja, interim deputy chief economist at the CBI.

Analysts, however, are slightly less pessimistic.

"Our hunch is that 2025 will be a better year for the economy than 2024," said Paul Dales, chief UK economist at research group Capital Economics.

He explained that the data suggests "the economy ground to a halt in the second half of the year due to a combination of the lingering drag from higher interest rates, weaker overseas demand and some concerns over the policies in the budget."

However "more recent data suggest the economy doesn't have much momentum as the year comes to a close," he added.

F.Davis--SMC