UK GDP: UK economy stagnates

Latest GDP data shows the UK economy showed no growth in the third quarter of the year due to rising interest rates. But have we side-stepped a recession?

Modern London office towers viewed from above
(Image credit: shomos uddin)

The UK economy took an unexpected turn in the three months to September, as the latest GDP data, which measures the value of goods and services produced, show the UK economy flatlined, with no growth between July to September 2023.

This follows a 0.2% growth in the last quarter and 0.1% growth in August. 

The figures released by the Office for National Statistics come a week after the Bank of England warned that the UK could face zero growth until 2025, but is likely to avoid a recession.

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Last week, the BoE froze interest rates for the second consecutive month following a pause in rates in September.

Analysts had predicted a 0.2% fall for the quarter and a flat reading for September.

The ONS reported 0.2% growth in the economy for the month of September, amid a boost from the film production, health and education industries.

The ONS also revised down growth in August to 0.1%, from 0.2%, and reported a 0.6% decline for July.

Economists said the manufacturing and construction sectors particularly helped to support growth over the end of the quarter.

ONS director of economic statistics Darren Morgan said: “The economy is estimated to have shown no growth in the third quarter.

“Services dropped a little with falls in health, management consultancy and commercial property rentals.

“These were partially offset by growth in engineering, car sales and machinery leasing.”

Will the UK go into a recession?

As it stands, the UK seems to have dodged a recession for now. 

Alice Haine, personal finance Analyst at Bestinvest says: “The dismal quarterly data will reignite fears that the UK economy might be heading into a recession - defined by two successive quarters of contraction – as higher interest rates weigh on demand in the run up to Christmas.”

Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International also thinks recession isn’t off the cards just yet. 

“Looking at the broader picture, it means GDP has shown no growth in the three months to September 2023 when compared with the three months to June 2023 - leaving Britain at risk of recession.

Huw Pill, chief economist at the Bank of England, said “in order to keep rising inflation at bay, the best medicine for the UK economy was to keep interest rates at their current level of 5.25%, this sense of déjà vu could rear its head again in the months to come. For rates to come down, next August is now the date to aim for”.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “We continue to think that the chances of a recession look low; we look for a 0.3% quarter-on-quarter increase in GDP in Q4 and expect that pace to be broadly maintained next year.”

Additional reporting by PA

Vaishali Varu
Staff Writer

Vaishali has a background in personal finance and a passion for helping people manage their finances. As a staff writer for MoneyWeek, Vaishali covers the latest news, trends and insights on property, savings and ISAs.

She also has bylines for the U.S. personal finance site and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury

Before joining MoneyWeek, Vaishali worked in marketing and copywriting for small businesses. Away from her desk, Vaishali likes to travel, socialise and cook homely favourites