- UK economy shrank 0.2% in the third quarter and 0.6% in September
- Bank holiday to mark the Queen’s funeral contributed to fall in economic output
- Services sector flat, while all 13 manufacturing subsectors recorded falls in output
- The construction sector continues to show modest growth – although the outlook is less positive
- UK the weakest performer in the G7 (excluding Japan which has yet to report)
Nicholas Hyett, Equity Analyst, Wealth Club
“Were it not for the disruption caused by the Queen’s funeral – during which many businesses shut – it’s just possible the UK economy could have scraped a positive performance in Q3.
But despite that perhaps surprisingly strong result, the Q3 GDP announcement is full of warning signs. Inflation is squeezing consumer spending, inward investment has fallen and supply constraints are restricting activity in the manufacturing and construction sectors. The mini-budget turmoil only kicked in right at the end of the period – and that is likely to have left Q4 off to a poor start.
With consumers battening down the hatches for a tough winter and the government proposing substantial tax rises and spending cuts, we think the economy will shrink again in Q4 – officially pushing the UK into recession. With the Bank of England predicting recession could stretch well into late 2023 or even beyond, the Queen’s funeral may end up marking the start of an “annus horribilis” for the whole of the UK.”
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