UK economy contracts in September in blow to Reeves' growth push

Britain’s economy contracted unexpectedly in September and growth slowed to a crawl over the third quarter, data showed on Friday, an early setback for finance minister Rachel Reeves’ ambitions to kick-start a sustained pickup.

Gross domestic product slipped by 0.1% in monthly terms during September as the services sector flat-lined, while manufacturing and construction dropped, the Office for National Statistics said.

For the third quarter as whole, the economy grew by 0.1%, slowing from 0.5% growth during the second quarter.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2% in the July-September period, slowing from the rapid growth of the first half of 2024 when the economy was rebounding from last year’s shallow recession.

“Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” Reeves said.

“Now we are going to deliver growth through investment and reform,” she added.

On Thursday Reeves promised a reboot of regulation governing Britain’s “crown jewel” financial industry, which she said had stifled economic growth.

A 1.2% quarterly rise in business investment, which has grown for four quarters, was a bright spot in Friday’s data.

Sterling and British government bonds were little changed after the data.

The opposition Conservative Party said Reeves had talked down the economy too much after Labour won the election by a landslide in July and weak growth was the result.

Last week, the BoE trimmed its annual growth forecast for 2024 to 1% from 1.25% but predicted a stronger 2025, reflecting a short-term boost to the economy from the big-spending budget plans of Reeves.

Britain’s economic output has grown slowly since the COVID-19 pandemic and is up 3% since late 2019.