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The UK economy failed to grow in the third quarter, according to the latest official figures, in a fresh blow to the Labour government.
GDP did not register any growth in the three months to September, the Office for National Statistics said on Monday, down from its first estimate of a 0.1 per cent expansion.
The economy was held back as the dominant services sector stagnated in the quarter. Production output fell 0.4 per cent, offsetting a 0.7 per cent increase in the construction sector.
The figures are a setback to the government, which has put boosting the economy’s growth at the heart of its agenda. Surveys have pointed to the chilling effect of chancellor Rachel Reeves’ tax-raising Budget in October, which has hit business confidence and curtailed hiring intentions.
Reeves on Monday admitted that the government faced a “huge” challenge but insisted that the Budget had laid the foundations for long-term growth.
If growth undershoots forecasts made in the Budget, it raises the prospect that Reeves may need to deliver spending cuts or higher taxes next year to ensure she continues to meet her borrowing rules.
“The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge,” Reeves said. “But this is only fuelling our fire to deliver for working people.”
Last week Andrew Griffith, shadow business secretary, claimed the UK was heading for a “January of discontent” and the possibility of a recession. He said if there was a recession it would be “made in Downing Street”.
