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UK economy grinds to a halt days before general election

Tom Belger
Finance and policy reporter
Britain’s economy grew at its slowest annual rate in seven years. Photo: PA

Britain’s economy ground to a halt in October, with figures showing GDP flatlining just as the country gears up for a general election.

Official figures from the Office for National Statistics (ONS) published on Tuesday show UK economic output was unchanged month-on-month in October, though it had seen a 0.1% decline in September. Analysts had expected the economy to narrowly recover by 0.1%.

The data also showed Britain’s economy grew at its slowest annual rate in seven years, with GDP up only 0.7% in the year to October compared with a year earlier.

It marked the weakest annual performance since March 2012. Growth was also flat across the three months to October.

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Marc-André Fongern, an FX analyst at MAF Global Forex, said it meant the Bank of England was “likely to be toying with the idea of lowering interest rates.”

He added: “A loosening of monetary policy in the near future would indeed ease the burden on the domestic economy.”

Sterling had edged higher against the dollar ahead of the announcement, but analysts said it reflected growing expectations of a Conservative victory rather than confidence in the economic data.

The figures come as the UK’s main political parties make their last pitch to voters this week in a final push to win over the undecided and encourage supporters to turn out.

“Sterling price action is all about the upcoming parliamentary election and real economic data should continue to play second fiddle," ING analysts said in a note sent to clients.

Growth was flat over the three months to October. Chart: ONS

Many investors hope a Conservative victory would help break the current Brexit deadlock, which has seen parliament resist several potential Brexit outcomes.

An ONS spokesperson said: “The UK economy saw no growth in the latest three months. There were increases across the services sector, offset by falls in manufacturing with factories continuing the weak performance seen since April.

“Construction also declined across the last three months with a notable drop in house building and infrastructure in October.”

David Cheetham, chief market analyst at XTB noted a “slight pick-up” in industrial and manufacturing production but said both were “still firmly in negative territory.”

He said the flat reading was “hardly something to celebrate,” tweeting: “Quite clear economic growth has effectively ground to a halt.”